Preamble

The House met at a Quarter fast Two o'Clock

PRAYERS

[Mr. SPEAKER in the Chair]

Oral Answers to Questions — CIVIL AVIATION

Almaza Airport, Cairo

Flight-Lieutenant Beswick: asked the Parliamentary Secretary to the Ministry of Civil Aviation whether he proposes to ask the Egyptian authorities to instal the standard British blind approach system at Almaza airport, Cairo.

The Parliamentary Secretary to the Ministry of Civil Aviation (Mr. Ivor Thomas): As my hon. and gallant Friend realizes, Almaza airport is an Egyptian State aerodrome administered by the Egyptian Department of Civil Aviation. My Noble Friend would, of course, be glad to facilitate the provision of suitable equipment if the Egyptian Government should so desire.

Rail and Shipping Companies (Talks)

Mr. Ward: asked the Parliamentary Secretary to the Ministry of Civil Aviation whether his Ministry has yet begun talks with the railways and shipping lines interested in civil aviation; and whether he has any statement to make on progress.

Mr. Ivor Thomas: Conversations have been in active progress. I am not in a position to make a statement at present but my Noble Friend will do so as soon as possible.

Mr. Thomas: We are taking every step we can, but it does not rest in our hands alone.

Mr. Gallacher: In any conversations with regard to civil aviation, will the Minister see that something is done to augment the service between London and Glasgow?

Turnhouse Aerodrome

Mr. Willis: asked the Parliamentary Secretary to the Ministry of Civil Aviation if he will make a statement on the future use of Turnhouse aerodrome as a civil airport for Edinburgh.

Mr. Ivor Thomas: The future of Turn-house has not yet been settled. My Department is in consultation with the Air Ministry on this subject, and a statement will be made as soon as possible.

Sir William Darling: Will the Department also consult with the City of Edinburgh in this matter?

Mr. Thomas: If the City of Edinburgh wishes to make any point of view heard, we shall be glad to hear it.

White Paper

Sir Wavell Wakefield: asked the Parliamentary Secretary to the Ministry of Civil Aviation when the White Paper on the Government's proposals for the future organisation of civil aviation will be issued.

Mr. Ivor Thomas: My Noble Friend must first conclude the conversations to which he referred in his statement on civil aviation policy on 1st November. The White Paper will then be issued without delay.

Sir W. Wakefield: Can the Parliamentary Secretary say why there is all this delay, since the White Paper should have been issued some time ago? Is there any difficulty or hold-up?

Mr. Thomas: It would have been very easy to have issued a White Paper which would merely have been an expansion of the statement of policy, but my Noble Friend has said that he wishes to include in it the results of his conversations with the surface transport interests. As soon as that is possible, he will publish the White Paper without delay.

Freight Services

Colonel Erroll: asked the Parliamentary Secretary to the Ministry of Civil


Aviation whether the Government intend to develop regular air freight services independently of passenger and passenger-cum-freight services.

Mr. Ivor Thomas: It is the Government's intention that the air transport corporations shall provide adequate transport for all air traffic needs including special freight services where justified.

Colonel Erroll: Does that reply exclude the possibility of privately operated freight services?

Mr. Thomas: It does not exclude the possibility, but all regular scheduled services will be run by the public corporations.

Sir W. Wakefield: Does that mean that any industry that wished to run regular aircraft from Manchester to Lille or some other service of that kind, would be precluded from doing so?

Mr. Thomas: If it were a regular scheduled service, that would be so.

Oral Answers to Questions — EAST AFRICA

Civilians (Repatriation)

Squadron-Leader Donner: asked the Secretary of State for the Colonies whether he will provide sea and/or air transport to bring to this country some hundreds of civilian men and women who have now been in East Africa several years without a break.

The Secretary of State for the Colonies (Mr. George Hall): I fully appreciate this need and am glad to say that 586 civilians have been provided with passages from East Africa this month. Subject to military requirements, there will be further opportunities of moving civilians from that area during the next few months.

Squadron-Leader Donner: Will the right hon. Gentleman bear in mind that any progress that can be made will be very much appreciated, as so many of these people have been in East Africa for a very long time?

Interterritorial Co-ordination

Squadron-Leader Donner: asked the Secretary of State for the Colonies whether he has any statement to make on the subject of interterritorial co-ordination in East Africa.

Mr. George Hall: I have recently discussed the machinery for interterritorial co-ordination in East Africa with the Governor of Kenya, who is Chairman of the East African Governors' Conference. I hope to make a statement on the subject on 12th December.

Oral Answers to Questions — NIGERIA

Italian Nationals

Mr. Turton: asked the Secretary of State for the Colonies how many Italians have been granted permission to work in Nigeria since the capitulation of Italy.

Mr. George Hall: Twelve, Sir.

Mr. Turton: Will the Minister give an assurance that the Africans and the men who fought in the West African Forces will be given priority over the Italians?

Mr. Hall: Their needs are apparent.

Mr. Turton: asked the Secretary of State for the Colonies whether, since the termination of hostilities, any Italians have been granted permission to trade or otherwise carry on business in Nigeria.

Mr. George Hall: Yes, Sir. Six Italians have been granted permission to do so.

Mr. Turton: Is the right hon. Gentleman aware that great consternation has been caused in Nigeria by the granting to Italians of this permission to trade?

Mr. Hall: We have had no evidence of that.

Government-owned Colliery

Colonel Erroll: asked the Secretary of State for the Colonies if the accounts of the Government-owned colliery in Nigeria are kept on a commercial basis; and if the undertaking has been run at a profit since its inception.

Mr. George Hall: Up till now the accounts of this colliery have not been kept on a commercial basis, but it is proposed to put them on to a commercial basis as soon as the necessary accounting staff can be obtained. I have not the figures relating to profits since its inception but the most recent returns indicated a profit.

Colonel Erroll: Will the right hon. Gentleman be good enough to give an assurance that all the overheads, including


such matters as leave passages for British personnel, are included in the future accounts?

Mr. Hall: That is a matter which will be considered when the accounting staff is appointed.

Oral Answers to Questions — MALTA

Food Rations

Lieut.-Colonel Mackeson: asked the Secretary of State for the Colonies how the rations in Malta compare with those in the United Kingdom; and if there are any shortages of fats and milk which are likely to affect the health of the population, especially the children.

Mr. George Hall: As the answer is long and contains a number of figures, I will, with the hon. and gallant Member's permission, circulate it in the Official Report.

Lieut.-Colonel Mackeson: Will the right hon. Gentleman investigate the possibility of using requisitioned Italian schooners and landing craft for this purpose?

Mr. Hall: Perhaps the hon. and gallant Gentleman will look at the statement I am issuing, and then if he cares, 1 will discuss the matter with him further.

Following is the statement:

It is difficult to compare the rationing systems of Malta and the United Kingdom, since different foods are rationed in each country. Cheese, preserves and fresh eggs, for instance, are unrationed in Malta, though they are more expensive than in the United Kingdom; while flour and bread, which are cheaper than here, are rationed. There are 1½ oz. more sugar and 1 oz. more fat in the Maltese weekly ration than in the British, and the dried egg allocation is also more generous.

The bread ration in Malta is 21 oz. a head a day for a man, 14 oz. a head a day for a woman and 10½oz. a head a day for a child under seven. The flour ration in 7 oz. a head a week, the paste ration is 14 oz. a head a week. Frozen meat is rationed at 14 oz. a head a week, fresh meat unrationed. Dried egg is rationed at 7.oz. a head a week in Malta as compared with 5 oz. for adults, 10 oz. for children every eight weeks in England. Semolina (children only) and coffee are rationed in Malta, but not England; tea, biscuits, sardines, dried peas, beans and

fruit in England but not Malta. With regard to milk, I would refer to my answers to questions on 14th November and 24th October by the hon. Members for Drake (Mr. Medland) and Hythe (Lieut.-Colonel Mackeson) respectively.

Executive Council

Mr. Bottomley: asked the Secretary of State for the Colonies if he can make a statement on the results of the recent general election in Malta; and whether the Governor has accepted the nominee of the Malta Labour Party for the new Executive Council.

Mr. George Hall: Nine Labour candidates and one Independent have been elected to the Council of Government. I understand that the Governor proposes to nominate two of the Labour members to the Executive Council, but I have not yet received his formal recommendations.

Living Conditions

Viscount Hinchingbrooke: asked the Secretary of State for the Colonies how many people in Malta now fall within the Governor's definition as living in unsatisfactory conditions; and what was the comparable figure 12 months ago.

Mr. George Hall: 2,579 families were registered as living in unsatisfactory conditions on 1st November last, as compared with 3,620 families on 1st November, 1944; a decrease therefore of approximately one-third.

Viscount Hinchingbrooke: Are we to deduce from that reply that the right hon. Gentleman is satisfied with the rehousing measures that are being undertaken?

Mr. Hall: I will never be satisfied until housing conditions are very much improved.

Oral Answers to Questions — BAHAMAS (OIL PROSPECTING)

Mr. C. S. Taylor: asked the Secretary of State for the Colonies how many applications have been received to prospect for oil in the Bahamas; and by whom these applications were made.

Mr. George Hall: As the reply is long and contains figures I will, with the hon. Member's permission, circulate it in the Official Report.

Following is the statement:

Applications for oil exploration licence in the Bahamas have been received from


nine companies, some of which have applied for more than one area. The areas applied for include the waters surrounding the Bahamas.

The following is a list of the applications, indicating the areas so far allocated to each applicant. Under the law, application must be made by a locally registered company and the name of the parent company is, therefore, shown in brackets where appropriate.

Square Miles


1. Anglo-Bahamian Petroleum Company Ltd. (Anglo-Iranian Oil Company.)
12,925


2. Standard Oil (Bahamas) Ltd. (Standard Oil Company of New Jersey)
8,474


3. Bahamas Oil Company Ltd. (Superior Oil Co. of California)
8,996


4. British Bahamian Oil Development Co. Ltd. (Central Mining and In-vestment Corporation)
6,434


5. Bahamas Oil Exploration Company Ltd. (Gulk Exploration Co.)
3676


6. Shell Overseas Exploration Co. Ltd. (Anglo-Saxon Petroleum Company)
5,392


7. Nassau Oil Mining Company Limited (a local company)
1,502


8. Bahamas Mining Company Limited. Application still under consideration
—


9. Texas Petroleum Co. Ltd. Application still under consideration
—

Oral Answers to Questions — CYPRUS (UNEMPLOYMENT)

Lieut.-Colonel Mackeson: asked the Secretary of State for the Colonies how many unemployed persons there are in Cyprus.

Mr. George Hall: The total number of unemployed persons in Cyprus is estimated at 1,000.

Oral Answers to Questions — WEST AFRICA

Newspapers

Mr. Turton: asked the Secretary of State for the Colonies what are the circulation figures of newspapers published in Nigeria, Gold Coast and Sierra Leone, respectively.

Mr. George Hall: As the reply includes a number of figures I will, with the hon. Member's permission, circulate it in the OFFICIAL REPORT.

Following is the statement:

The following, according to the most recent information available, are the figures for estimated or claimed circulation:

Nigeria. 
Circulation 


Nigerian Daily Times
7,000


West African Pilot
10,000


Eastern Nigeria Guardian
3.500


Daily Service
10,000


Nigerian Spokesman
2,000


Southern Nigerian Defender
2,500


Comet
9,000


Yoruba News (weekly)
1,000


Akede Eko (weekly)
3,000


Nigerian Observer (weekly)
2,000


Nigerian Eastern Mail (weekly)
4,000


Nigerian Catholic Herald (weekly)
6,000


Nigerian Herald (weekly)
1,000


Nigerian Review (weekly Government paper)
34,000


Gaskiya (fortnightly Government paper)
17,000


Gold Coast


African Morning Post
4,000


Daily Echo
4,000


The Daily Spectator
6,000


The Ashanti Pioneer
2,000


The Gold Coast Independent (weekly)
3,000


The Gold Coast Observer (weekly)
2,000


Sierra Leone.


Sierra Leone Daily Mail
3,000


Sierra Leone Daily Guardian
1,000


Sierra Leone Weekly News
1,000


African Standard (weekly)
3,000


Note. —Daily unless otherwise stated.

Civil Service (Inquiry)

Mr. Skinnard: asked the Secretary of State for the Colonies whether he will revise the terms of reference of the Harragin Commission of Inquiry into the structure and remuneration of the Civil Service in West Africa to include unestablished and daily paid staffs.

Mr. George Hall: This suggestion has already been fully gone into: but I fear that it is not feasible to adopt it. The conditions of service of unestablished and daily paid staff differ between the four individual Colonies, and there would be difficulties in including these matters within the scope of a commission designed to cover British West Afrca as a whole.

Mr. Skinnard: Will the Secretary of State endeavour, once the report of the Harragin Commission is available, to prepare some form of machinery whereby considerable increases in the pay of the unestablished staff take place?

Mr. Hall: I would prefer to await the report of the Commission before committing myself.

Mr. Skinnard: asked the Secretary of State for the Colonies whether he is aware that dissatisfaction has been expressed by the Nigerian Trades Union Congress at the inclusion of Colonial civil servants on the Commission of Inquiry into the structure and remuneration of the Civil Service in West Africa; and whether he will appoint instead independent persons who are in a position to be completely disinterested.

Mr. George Hall: I have received representations from the Nigeria Trades Union Congress on this subject. The decision to entrust this inquiry to a single commissioner was taken only after the most careful consideration. The appointment by me of the Chief Justice of the Gold Coast to be the commissioner was made in the full confidence that he would conduct his inquiries with due regard to the interests of all members of the West African Civil Services, whether European or African.

Oral Answers to Questions — MALAYA (TRADE UNION ORDNANCE)

Mr. Piratin: asked the Secretary of State for the Colonies what steps he is taking, in view of the fact that the General Labour Union of Singapore now has the support of over 100 organisations and for the first time embraces Malay, Chinese and Indian workers in one organisation, to repeal the 1941 Trade Union Ordinance which severely restricts the activities of trade unions; and what steps he is taking to ensure the recognition of trade unions by the appropriate authorities in Singapore and Malaya.

Mr. George Hall: If my hon. Friend will be good enough to inform me in what way he considers that the Trade Union Ordnance of 1941 severely restricts the activities of trade unions, I will carefully consider the matter in consultation with my right hon. Friend the Secretary of State for War, as Malaya is, for the time being, under military administration.

Oral Answers to Questions — PALESTINE

Mufti of Jerusalem

Mr. George Porter: asked the Secretary of State for the Colonies what reply has been given to the request of the Arab League for the return of the former Mufti

of Jerusalem to Palestine; and if he will, inform the Arab League that this henchman of Hitler's is an enemy of the British Empire and a war criminal, and that he will be treated as such.

Mr. George Hall: I have received no request of this nature; the second part of the Question does not therefore arise.

Mr. Porter: Does not the right hon. Gentleman think it is time some definite relationship was determined as between this individual and the British Government?

Mr. Hall: We must get the man first.

Anglo-American Commission 35.

Mr. Lipson: asked the Secretary of State for Foreign Affairs if he is now able to give the names of the British members of the Commission on Palestine.

The Secretary of State for Foreign Affairs (Mr. Ernest Bevin): I hope to make a statement on this subject very shortly.

Oral Answers to Questions — CHINA

Situation

Mr. Osborne: asked the Secretary of State for Foreign Affairs if he has any statement to make on the civil war in China, in view of the gravity of its repercussions in British trading interests; and what active steps he is taking towards the ending of this situation.

Mr. Bevin: Armed clashes on a considerable scale between the Chinese Government troops and the Chinese Communists have taken place, more especially in North China. Mean-while, negotiations between the Chinese Government and the Communists continue. The Chinese Government also announced recently the postponement of the convocation of the National People's Assembly until 5th May next year, to permit of its being preceded by the meeting of a Political Consultative Council representative of all parties, which will have authority to discuss, and if possible settle, the points at issue between the Chinese Government and the Communists.
His Majesty's Government regard this as an internal problem for the Chinese themselves to resolve. Although there is no evidence that British trading interests


have so far been directly affected by the dispute, I am most anxious to see a settlement.

Mr. Osborne: Is the Minister aware that arms are being supplied to either side by two of the old great Allies, and is there not a danger that this might develop into a second Spain? Will the Minister and the Government do what they can to prevent that situation arising?

Mr. Bevin: I am not certain of that. I have no evidence that arms are being supplied in that way.

Air-Commodore Harvey: Will the Foreign Minister state whether discussions with the Soviet Union and America have taken place on the general situation in China?

Mr. Gallacher: Have not the leaders of the Soviet Union made a declaration that they recognise one Government in China —that of the Kuomintang?

Mr. Bevin: They recognise us, but they suffer a bit from the hon. Member's party at times.

Oral Answers to Questions — M. MICHAEL PADEV

Major Freeman: asked the Secretary of State for Foreign Affairs whether he is yet prepared to make a statement about the threatened expulsion from this country of M. Michael Padev.

Mr. Bevin: I am unable further to reconsider the decision which has already been taken on this matter. I regret that I cannot make a statement at present, as it would not be in the public interest for me to do so.

Major Freeman: In view of the fact that this is a very delicate matter, and the answer is not very satisfactory, will the right hon. Gentleman agree to discuss it in private later?

Mr. Bevin: Certainly, Sir.

Oral Answers to Questions — ITALY (GOVERNMENT)

Captain Bullock: asked the Secretary of State for Foreign Affairs if he has any statement to make on recent events in Italy.

Mr. Bevin: The Italian President of the Council, Signor Parri, tendered his resignation to the Lieutenant General of the Realm on 24th November as a result of a crisis caused by those Ministers belonging to the Liberal Party refusing any longer to serve under Signor Parri. The Lieutenant General of the Realm is now endeavouring to form a new Government. As I indicated during the Debate on 23rd November, I trust that Italy will soon find a strong and united Government under which the Italian people will devote themselves seriously to the work of reconstructing their country on a democratic basis. The composition of such a Government is, of course, a subject of domestic concern for the Italian people.

Oral Answers to Questions — RUDOLF HESS

Mr. Thurtle: asked the Secretary of State for Foreign Affairs if he will now reveal the nature of the information obtained from Rudolf Hess when he arrived uninvited in this country in 1940.

Mr. Bevin: My hon. Friend will recall that a very full statement on the views expressed by Hess and the information obtained from him on his arrival in this country was made to the House by the right hon. Member for Warwick and Leamington (Mr. Eden) on 22nd September, 1943. I have nothing at present to add to that statement.

Mr. Thurtle: Is the right hon. Gentleman aware that that statement did not disclose the real essence of the message which was brought to this country, and, as the right hon. Gentleman believes in open diplomacy, will he not, at least, lay this card on the table face upwards?

Mr. Bevin: I should have thought that, if there is any other evidence to come out which has not been revealed already, there is a very good opportunity to bring it out at Nuremberg.

Mr. Stokes: May I ask the Foreign Secretary whether he is aware that the right hon. Gentleman the Member for Warwick and Leamington (Mr. Eden) stated at the time that we could not reveal that evidence? Is there any reason why this secrecy should now continue, and will the right hon. Gentleman say what it is?

Mr. Gallacher: And give us Ramsay's book, too.

Mr. Bevin: I must confess that, apart from reading the statement, I have not had time to go back over the whole of the documents since this Question was put down, but I am convinced that, if there is anything else to be brought before the court, now is the time, when the whole thing can be revealed. I have no objection.

Mr. Eden: Is it not a fact that all the information the right hon. Gentleman has has already been given? If my recollection is in any way inaccurate, would it not be desirable for it to be given now, anyway?

Mr. Stokes: May I ask the Foreign Secretary whether he is aware that the right hon. Gentleman the Member for Warwick and Leamington repeatedly refused to give the statement for which I asked?

Mr. Eden: No.

Mr. Bevin: Apparently, I am now cast, not for the role of Foreign Secretary, but for that of referee.

Mr. Sydney Silverman: Is it within the recollection of the right hon. Gentleman that, on the occasion to which he refers, I raised the Debate on the Adjournment, and, according to the best of my recollection, the right hon. Gentleman the Member for Warwick and Leamington said that the time had not yet come when he could give us that information? Has not the time come now?

Mr. Bevin: I can only repeat that hon. Members really ought not to ask an already overworked Foreign Secretary to read all this nonsense about Hess, when we are paying, I think, fairly good fees to do it somewhere else.

Oral Answers to Questions — ROYAL NAVY

Schoolmasters

Mr. Harold Davies: asked the First Lord of the Admiralty when he is going to implement the promise made to the hon. Member for Cardiff, South, by announcing the new terms of employment for schoolmasters in the Royal Navy.

The First Lord of the Admiralty (Mr. A. V. Alexander): As I informed the hon. Member for South Cardiff (Mr. Callaghan) on 20th November, Naval school-

masters will be granted commissioned rank, and the problems of detail inherent in this decision are already under active consideration.

Mr. Callaghan: asked the First Lord of the Admiralty if he will now state the revised post war conditions of service for Royal Navy schoolmasters.

Mr. Alexander: It will not be possible to announce the final post war conditions of service for Royal Navy schoolmasters in advance of those for Naval officers generally. As I informed the hon. Member in my reply of 20th November, then-conditions of service in the interim period are under active consideration.

Lieut.-Commander Gurney Braithwaite: Have any appreciable number of the "hostilities only" schoolmasters expressed a desire to turn over to active service?

Mr. Alexander: A certain number. I have not got the number in my head, but I will let the hon. and gallant Member know.

Fishing Vessels

Major Sir Basil Neven-Spence: asked the First Lord of the Admiralty if he is aware that many fishermen are anxious to acquire motor fishing vessels from his Department; whether any vessels are now available; and whether they are to be sold direct by his Department or under arrangements made with the Minister of Agriculture and Fisheries and the Secretary of State for Scotland.

Mr. Alexander: The answer to the first part of the Question is "Yes, Sir." The information sought in the second part of the Question is contained in the reply I gave to the hon. Member for Orpington (Sir W. Smithers) on 14th November. With regard to the third part of the Question, any vessels which may become surplus at home will be sold by the Admiralty, but only after consultation with the Ministry of Agriculture and Fisheries and the Scottish Home Departments.

Earl Winterton: Will any sale be on a basis that a fair chance will be given to the smaller fishing fleets of the South coast?

Mr. Alexander: There is nothing to prevent them bidding, but I think we should


take the highest bid, whoever makes it. There will be great variety and different sizes —45 feet, 60 feet, 70 feet and 90 feet boats —but I do not think they will be shut out.

Commander Douglas Marshall: asked the First Lord of the Admiralty if he will consider giving fishermen the first refusal of any Admiralty vessels of possible use to them whenever it is decided that these vessels are for disposal.

Mr. Alexander: All Admiralty surplus fishing vessels will be offered for sale in the first place to fishermen.

Commander D. Marshall: asked the First Lord of the Admiralty if he will en sure that any Admiralty vessels offered for sale to fishermen are priced at the lowest possible level.

Mr. Alexander: The intention is to negotiate prices on the principle laid down in the White Paper on disposals, that is, prices fair and reasonable in relation to the current prices of similar craft.

Commander Marshall: Will the right hon. Gentleman bear in mind, when these prices are fixed, that these fishermen form the backbone of the Royal Navy, and will he keep the prices, in view of this fact,' as low as possible?

Lieut.-Colonel Sir Thomas Moore: Will the Minister give priority to ex-members of the Royal Navy?

Demobilisation

Sir W. Wakefield: asked the First Lord of the Admiralty why release of naval V.A.D. s is being delayed compared with V.A.D. s with the R.A.F. and the Army.

Mr. Alexander: Compared with the Army and the R.A.F., the Navy has throughout the war, and still is, responsible for a larger proportion of the hospital treatment of its own personnel. The duties of the medical branch of the Royal Navy have not, therefore, diminished to the same extent as in the other Services. The entry of recruits and the closing down of auxiliary hospitals should result in a speeding up of the release of Naval V.A.D.s. The closing down of three auxiliary hospitals is now being actively considered.

Sir W. Wakefield: Is the right hon. Gentleman aware that there is a real feeling of grievance that some of these girls are not fully occupied and that quicker release could be made, compared with what is happening in the other two Services?

Mr. Alexander: I am not aware that there is, in relation to the number of beds to be covered, any real lag behind in the Naval V.A.D. but I shall be glad to look into any specific case brought to my notice.

Mr. Baldwin: Is the Minister aware that, at a naval hospital in Dumbartonshire recently there were seven nurses in charge of six patients, and does he not think that, at least, one of them is redundant?

Mr. Medland: Is it not a fact that this trouble with Naval V.A.D.s is largely due to the fact that there is a shortage of sick-berth stewards in the Navy at the present time?

Mr. Alexander: Yes, there has been a severe shortage of sick-berth ratings because, in the earlier part of the war, very few of the men joining the Navy wanted to go into that branch —they all wanted to go into the fighting branch of the Service —and we are having difficulty now in getting them trained.

Flight-Lieutenant Beswick: asked the First Lord of the Admiralty the groups being released from the R.N. this month and the comparative release groups of men serving under T124/X engagement.

Mr. Alexander: The branches which are common to the T124/X personnel and R.N. General Service are the supply and engine-room branches. By 31st December we are scheduled to reach group 25 in the supply branch and group 26 in the engine-room branch. This applies both to the T124/X and general service personnel. The average rate of release for the Royal Navy will, by that time, have reached group 31.

Lieut.-Colonel J. R. H. Hutchison: asked the First Lord of the Admiralty why, on 9th November, Group 24 was still waiting in Ceylon, while Group 36 had been reached in other naval bases in India; and what the position is now.

Mr. Alexander: As hon. Members are already aware, it is impossible to release


the different branches of the Royal Navy at the same rate. So far as I know, there has been no case of difference in the rate of return to this country of groups of ratings of the same branch in Ceylon and India. If the hon. and gallant Member has any specific cases in mind, and will let me have details, I shall be glad to have them investigated.

Sir Hugh Lucas-Tooth: asked the First Lord of the Admiralty whether the rate of release of V.A.D.s, who are serving with the R.N., is based upon the same principles as those applicable to V.A.D.s serving with the Army and the R.A.F., or what principles are being applied to the demobilisation of these women.

Mr. Alexander: Yes, Sir.

Lieut.-Colonel Sharp: asked the First Lord of the Admiralty, whether he will now say if demobilised naval personnel will receive an additional day's release leave with pay for each month's overseas service; and if appropriate payments will be made to those already demobilised.

Mr. Alexander: Recent improvements in the foreign service leave schemes of the Army and the Royal Air Force upset the relativity of the Naval scheme. To restore the balance, it has now been decided to grant Naval personnel additional leave on release on the basis of one day's leave for each completed period of three months overseas service. This new leave, which will be known as "Special Overseas Service Leave," will not be granted in respect of service abroad for which foreign Service leave is granted on dispersal. This decision will apply retrospectively to all personnel dispersed since 18th June, 1945, in both Class A and Class B.

Mr. Lipson: Can the right hon. Gentleman say whether this concession will apply to the R.A.F. personnel serving in the Fleet Air Arm?

Mr. Alexander: I am not sure that this personnel is not already covered by the R.A.F. regulations, but I will look into it.

Engine Room Personnel

Mr. Willis: asked the First Lord of the Admiralty if he is aware that C.E.R.A.s and E.R.A.s holding C.P.O. rank are being detailed on some ships for

patrol duties; and will he take steps to ensure that these skilled and experienced ratings do not have their already heavy duties increased in this manner.

Mr. Alexander: Chief and engine room artificers are not customarily required to undertake duties such as patrols except in case of necessity. They are, however, required to be capable of such duties and their employment on them must be left to the discretion of the commanding officer of the ship.

Mr. Willis: Can my right hon. Friend give us an assurance that this will not become the general practice?

Mr. Alexander: I have indicated that it does not generally so happen, but conditions vary so much from time to time that you must give the commanding officer some discretion.

Mr. Willis: asked the First Lord of the Admiralty if he is aware that contrary to Art. 626 of K.R. & A.I., C.E.R.A.s are being placed in messes separate from E.R.A.s in H.M. L.S.T.s; and will he take steps to bring this practice to an end.

Mr. Bowles: On a point of Order, Mr. Speaker. Can we have this Question translated first?

Mr. Speaker: Perhaps the First Lord understands it. I do not.

Mr. Alexander: The design of these ships had to be settled as a matter of the highest operational urgency before the final complement had been fixed. The present arrangements which provided for one C.E.R.A. being placed in the chief petty officers' mess, were made with a view to accommodating the men as comfortably as possible. The possibility of enlarging the engine room artificers' mess is under consideration.

Mr. Stokes: What does L.S.T. stand for?

Mr. Willis: Is my right hon. Friend aware that in some of these vessels arrangements have already been made whereby chief engine room artificers can mess together, and will he look into the matter again with a view to making this the practice in them all?

Mr. Alexander: I will look into that.

Mr. Callaghan: If there are to be any more of these L.S.T.s built, will the First


Lord have a fresh look at the question of accommodation on board, because it is very poor at the moment?

Mr. Alexander: The principal purpose of a landing ship tank is to accommodate tanks, and we try to do it with as small a crew as possible.

Mr. Stokes: Will my right hon. Friend make sure there are some decent tanks to put in them?

Pensions

Lieut.-Commander clark Hutchison: asked the First Lord of the Admiralty whether, in view of the increased cost of living, he will consider raising the service pensions of officers and men of the R.N.

Mr. Alexander: Naval officers' retired pay has already been largely adjusted in relation to the change in the cost of living by the operation of the Pensions Increase Scheme which affects retired pay of less than £6oo a year. Naval ratings are, for the most part, in receipt of pensions on the 1919 scale. These were based on a cost of living figure higher than that prevailing today, and have suffered no cost of living cuts. Nevertheless, they are eligible for increases of up to 30 per cent, subject to the usual conditions of age, and means, under the Pensions Increase Scheme.

Lieut.-Commander Hutchison: Will the First Lord consider reviewing this matter in connection with postwar Service conditions?

Mr. Alexander: The whole of the postwar conditions are under examination, and I will have a look at the proposals as soon as they come up, to see how the position of retired pay is affected.

Singapore (Education Officer)

Mr. King: asked the First Lord of the Admiralty if he is aware that there is no education officer in Singapore, so that officers who are shortly to be demobilised are at a disadvantage with regard to the Forces preliminary examination; and if he will remedy this matter.

Mr. Alexander: I am pleased to inform my hon. Friend that an officer of the schoolmaster branch was transferred to Singapore early in November. In addition, an officer of the instructor branch

will shortly leave for Singapore to take up the post of Port Education Officer.

Requisitioned Property

Mr. Osborne: asked the First Lord of the Admiralty if he will give instructions forthwith for the release of a factory in Lower Kent Street, Leicester, particulars of which have been sent to him, since it is nearly empty and is required for ex port trade purposes.

Mr. Alexander: I hope to be able to release these premises in the Spring of next year.

Lieutenants, Far East (Emoluments)

Flight-Lieutenant Beswick: asked the First Lord of the Admiralty the gross emoluments, including family allowances, payable to a lieutenant in the R.N. serving in Far Eastern waters and the pay of an officer of similar rank serving in the same theatre under T124/X engagement.

Mr. Alexander: The answer to this Question is unavoidably long and detailed. I will, therefore, with my hon. and gallant Friend's permission circulate it in the Official Report.

Following is the answer:

As deck officers are not employed on a T.124 X basis in the Royal Navy, the comparison shown is between naval engineer officers and T.124 X engineers.

The pay and allowances of a Naval Lieutenant (E) serving afloat in the Far East are as follows:

(i) Full Pay. Minimum 19s. 0d. a day, taxable. Maximum£11s. 6d. a day, taxable.
(ii) War Service Increment. 9d. a day for each year's war service (minimum qualification, 3 years), taxable.
(iii) Japanese Campaign Pay. 3s. 0d. a day, taxable.
(iv) Marriage Allowance. 4s. 0d. a day, tax-free. (Under certain rules this rate may be either 4s. 6d. or 5s. 6d.)
(v) Children's Allowance. 2s. 0d. a day for each child, tax-free.

The emoluments of a T.124 X officer holding the rank' of Lieutenant (E), R.N.R., range from:

(a)£2.7 a month plus 15 per cent. Far East Allowance plus£10 a month War Risk Money =£41 1s. od.
(b)£42 5s. od. a month plus 15 per cent. Far East Allowance plus £10 a month War Risk Money =58 11s. 9d.

These emoluments are all taxable.

Oral Answers to Questions — CIVIL SERVICE PENSIONS (TEMPORARY SERVICE)

Sir Frank Sanderson: asked the Prime Minister whether he will consider the setting up of a Select Committee to consider the question of counting of temporary service in the Civil Service for pensions.

The Lord President of the Council (Mr. Herbert Morrison): I would refer the hon. Member to the reply to a similar Question given to him yesterday by my hon. Friend the Financial Secretary to the Treasury.

Sir T. Moore: Could the right hon. Gentleman say exactly when a temporary becomes a permanent?

Mr. Morrison: The point I am on this afternoon is whether a Select Committee should be appointed, and the Government do not think that would be the best way of handling the issue.

Mr. Lipson: Are the Government taking any action with regard to these temporaries?

Mr. Morrison: That is another matter. This is a question of procedure, of handling a given problem, and we do not think this is the right way to handle it.

Oral Answers to Questions — GERMANY ("BRITISH ZONE REVIEW")

Mr. Stokes: asked the Chancellor of the Duchy of Lancaster how many copies of the "British Zone Review," published fortnightly, are printed for circulation; and whether he will arrange to have a copy placed in the Library.

The Chancellor of the Duchy of Lancaster (Mr. John Hynd): Fifteen thousand copies. I have arranged for a copy to be placed in the Reading Room.

Mr. Stokes: Is this paper also circulating amongst such of the German population as are English-speaking, or is it made available to them? It is very important that it should be.

Mr. Hynd: I am not aware of the actual arrangements for distribution in our zone in Germany, but it is the common policy within the zone that English newspapers of all kinds shall be handed over to English-speaking Germans for their education.

Oral Answers to Questions — FOOD SUPPLIES

Cereals (Allocation)

Dr. Little: asked the Minister of Food the quantity of cereals grown in the United Kingdom during the year 1945 which has been assigned for brewing, distilling, the food of the people and feeding-stuffs, respectively.

The Minister of Food (Sir Benjamin Smith): The estimated usage of the cereals grown in the United Kingdom during the crop year 1945 –46, in thousands of tons, is as follows:

Brewing
…
…
819


Distilling
…
…
130


Food
…
…
2,051


Feeding Stuffs
…
…
3,704

Supplies for Europe

Sir W. Wakefield: asked the Minister of Food if any machinery exists where by persons desirous of relinquishing a proportion of their points in order to send food to the starving populations of Europe are enabled to do so; and if not, will he make the necessary arrangements together with appropriate publicity.

Sir B. Smith: The answer to both parts of the Question is "No, Sir."

Mr. Stokes: Is my right hon. Friend aware that public opinion in this country is entirely opposed to the attitude which he is adopting; that a large meeting at the Albert Hall recently protested in favour of voluntary contributions? May I have an answer to that question?

Sir B. Smith: No, I am not aware of it.

Mr. Stokes: Then will the Minister himself please attend the next meeting on this subject?

Mr. Speaker: The hon. Gentleman must ask questions in the proper way.

Mr. Stokes: I shall raise the matter on the Adjournment.

Milk Production, Scotland

Sir B. Neven-Spence: asked the Minister of Food if he will give an assurance that full use will continue to be made of the milk-producing potentialities of those areas in Scotland which were out- with the operations of the Milk Marketing Board at the outbreak of the war, but which have since been included, or are about to be included, in their operations.

Sir B. Smith: I can give the hon. Member the assurance for which he asks while the present system of control continues.

Tubercular Patients (Ration Allowances)

Mr. Cook: asked the Minister of Food if he will consider increasing the ration allowances, particularly eggs, milk, cheese and butter, to tubercular cases; and consider making more fish available to these cases.

Sir B. Smith: Tuberculous patients are allowed a priority supply of 14 pints of milk a week in addition to normal rations and allowances, and I am advised that this provision is adequate for their needs. Fish is not rationed, and the amount which may be purchased is not restricted by order.

Mr. Cook: Would the Minister tell us how he has arrived at the decision that this rationing is adequate?

Sir B. Smith: I am advised by my experts in the medical profession.

Catering Licences (Club)

Lieut.-Colonel Walker-Smith: asked the Minister of Food the grounds for refusal of a catering licence to the Barnet Young Conservative Youth Centre.

Sir B. Smith: Owing to the shortage of food no licences are at present being granted to clubs such as that mentioned by the hon. Member which did not previously provide catering facilities unless real hardship would be caused if the licence were withheld.

Lieut.-Colonel Walker-Smith: Is it not a fact that this licence was twice unanimously recommended by the local food committee, and that every other youth centre was granted a catering licence on that occasion?

Sir B. Smith: These licences are only granted where the Minister of Education recommends them. [Laughter] I repeat that. I am not looking after any one political party on this issue, and in this case I am advised that I shall be unable to give a licence without adding many hundreds of others.

Lieut.-Colonel Walker-Smith: Will the Minister say whether the Leicester Road Club in Barnet has not a licence, and whether that Club is not run by the chairman of the Labour Party?

Mr. Speaker: I must remind the hon. and gallant Member that the rules for questions apply to supplementary questions, and these lay down that a question must not contain inferences or imputations.

Sir T. Moore: Is the Minister of Education frightened of the youth of Barnet being educated in Conservative principles?

Boxed Fish

Commander Douglas Marshall: asked the Minister of Food if he will take steps to ensure that, at the first auction, boxes of fish are so labelled that they show whether the fish contained comes from the near, middle or distant waters and the date upon which the fish was caught.

Sir B. Smith: No, Sir.

Commander Marshall: May I ask the right hon. Gentleman on what data he has formed his reply of "No"?

Sir B. Smith: No, Sir.

Oral Answers to Questions — TRADE AND COMMERCE

Scottish Highlands and Islands (Industrial Development)

Mr. Malcolm MacMillan: asked the President of the Board of Trade when he hopes to be able to state if it is the intention of His Majesty's Government to extend the Development Areas provisions of the Distribution of Industry Act, so as to bring industrial development to the Islands and Highlands of Scotland.

The Parliamentary Secretary to the Board of Trade (Mr. Ellis Smith): My right hon. Friend is in close consultation with my right hon. Friend the Secretary of State for Scotland in the matter. It is not our present intention to propose the scheduling of the Highlands and Islands of Scotland as a Development Area. Our aim is to secure a stable and high rate of employment throughout the country, and my right hon. Friend the Secretary of State for Scotland has already initiated a series of measures designed to facilitate, the development of the economic resources of the Highlands. We shall continue to give full consideration to any proposal to attract or expand industries in these areas.

Mr. MacMillan: Is my hon. Friend aware that we are extremely alarmed at


the continuity of lack of policy; that as far as the Highlands are concerned the only developments taking place are for the export of power for the rehabilitation of other parts of Scotland; and that we would like some development in the Highlands for ourselves?

Mr. Smith: Controversy has taken place in this House in regard to the advisability of the industrialisation of the Highlands of Scotland, but there are other areas of Scotland besides the Highlands about which we are very concerned, and a relatively large number of unemployed are in those areas. The Highlands will benefit from the introduction of hydro-electrical development, and from the Herring Industry, the Rural Water Supply and other Acts.

Retail Business Licences

Mr. Harry Thorneycroft: asked the President of the Board of Trade (1) the total number of licences granted to traders who have acquired the goodwill of existing businesses; and the number granted to co-operative societies, multiple stores and other traders, respectively;
(2) the total number of retail business licences granted for the opening of new retail businesses up to the last available date; the number granted to multiple stores, co-operative societies and other traders.

Mr. Ellis Smith: Between 1st January 1942, when the Location of Retail Businesses Order came into force, and September 30th, 1945, 17,849 licences were granted for the opening of new businesses. Of these, 327 were granted to multiple stores; 94 to co-operative societies, and 17,428 to other traders. During the same period, 17,146 licences were granted to traders who had acquired the goodwill of existing businesses. Of these, 370 were granted to multiple stores; 338 to co-operative societies; and 16,438 to other traders.

Machinery Priorities

Mr. John Lewis: asked the President of the Board of Trade if he will arrange for the granting of priorities of deliveries for machinery necessary for the production of chemicals and raw materials required for the production of goods for export purposes; and what administrative machinery is available for representations to be made

by manufacturers who wish to apply for such priorities.

Mr. Ellis Smith: Owing to the difficulty in assessing priorities between one user of machinery and another, it is generally best to leave the machinery makers and their customers to decide on the order of delivery. But special arrangements can be made for exceptional cases which deserve overriding priority. In these cases, the machinery-user should submit his case to the department which deals with his industry.

Rubber and Latex

Mr. J. Lewis: asked the President of the Board of Trade what quantity of plantation rubber and latex he anticipates it will be possible to ship to this country during the next 12 months.

Mr. Ellis Smith: The International Rubber Study Group at its recent meeting estimated that supplies of natural rubber available in 1946 might reach approximately 600,000 tons. It is not yet possible, however, to say in what proportion supplies will be allocated among the various consuming countries.

Mr. Lewis: Has my hon. Friend read in this Question the words:
'it will be possible to ship to this country during the next 12 months"?

Mr. Smith: There are certain home needs that will have to be considered, and if my hon. Friend has any special case he would like to be considered by the Department and will send it along to us, we will see that consideration is given to it.

Folkestone and Hythe

Lieut.-Colonel Mackeson: asked the President of the Board of Trade if, in view of the heavy damage caused in Folkestone and Hythe and the dislocation of trade which still exists, he will have a report prepared on the industrial and economic situation of these two towns.

Mr. Ellis Smith: No, Sir. Our regional controller and those of the other Departments concerned are in close touch with the situation in these two towns and we see no reason to ask for a special report.

Lieut.-Colonel Mackeson: In view of the fact that a report has been prepared on the town of Dover, which has not suffered very much more than these two towns, will the hon. Gentleman reconsider his reply?

Mr. Smith: If the hon. and gallant Member will come along and discuss it with us, we will reconsider it. But may I ask him to consider, at the same time, that the most recent unemployment figures showed that in mid-October there were 35 men and boys, and 35 women and girls wholly unemployed at Folkestone? The figures at Hythe are not immediately available. If in spite of that, the hon. and gallant Gentleman wants to pursue the matter further and will come along, we will see him.

Lieut.-Colonel Mackeson: Is the Minister aware that these two towns are full of soldiers and that, of course, there are no unemployed —except unemployed in uniform?

Youth Organisations (Clothing Coupons)

Mr. Walker: asked the President of the Board of Trade whether, in order to encourage the work of youth organisations, he will exempt from coupons uniforms for Church Lads' brigades and other simliar movements.

Mr. Ellis Smith: Until more labour and materials are available, these uniforms cannot be exempted from coupons.

Mr. Walker: In view of the fact that these organisations are being retarded in their progress, will my hon. Friend consider releasing from coupons the ample supplies of uniform-cloth, and second-hand uniforms which are available?

Mr. Smith: No one is more sympathetic to these organisations than I am, having benefited from them in my younger days. There are a number of them and the position is difficult; there are Scouts, Guides and others, and if you give way to one organisation you have to give way to all. We will keep the matter in mind and as soon as some readjustment can take place it will be considered.

Mr. Walker: Is my hon. Friend aware that my Question refers to other organisations apart from the Church Lads' Brigade movement, and that I take them all in?

Oral Answers to Questions — DIVORCE PROCEEDINGS (POOR PERSONS)

Flying-Officer Bowden: asked the Attorney-General how many cases of proceedings for divorce promoted through the

Law Society Poor Persons Committee are awaiting hearing.

The Attorney-General (Sir Hartley Shawcross): The number of cases of proceedings for divorce promoted through the Poor Persons Committee of the Law Society which have been set down and are awaiting hearing is, at the present moment, approximately 1,600.

Flying-Officer Bowden: Will the hon. and learned Gentleman state if any new legal machinery is contemplated to deal with these cases?

The Attorney-General: That matter is now receiving consideration.

Mr. Janner: Will the hon. and learned Gentleman be prepared to revise the release of solicitors in order to cope professionally with these cases?

The Attorney-General: The whole question of expediting the machinery of the courts in connection with divorce and other proceedings is now being considered in all its aspects, including that one.

Mr. Murray: Will the hon. and learned Gentleman try to speed up this business? On Sunday night a young man told me that he had been four years trying to get a divorce, and he is no further forward yet.

Mr. Logan: Will the hon. and learned Gentleman say if it is possible to postpone the operation of divorce for a period of five years?

Oral Answers to Questions — JUSTICES OF THE PEACE, GLOUCESTERSHIRE

Mr. Alpass: asked the Attorney-General if he is aware that of the 319 justices of the peace for the county of Gloucester only 49 of these are members of the Labour Party; that the Labour Party has only two members out of nine on the advisory committee; and if he will take steps to adjust this position in the early future.

The Attorney-General: As my hon. Friend is no doubt aware, the responsibility for the advice given to the Crown in relation to the selection and appointment of justices of the peace, rests with the Lord Chancellor. While my Noble Friend has no up to date information as to the present number of justices on the commission of the peace for the county


of Gloucester, or how many of these are members of the Labour Party, he has no reason to suppose that the figures given in the Question are not substantially correct, but it seems probable that the figure of 319 includes about 50 ex officio justices and justices on the supplemental list.
A number of appointments were made to the county commission in June last, and my Noble Friend is satisfied that it would not be justifiable to make further appointments at present. The Lord Chancellor's Advisory Committee for the county of Gloucester consists, in addition to the ex officio chairman, His Majesty's Lord Lieutenant, of eight members of whom three are Conservative, two are Labour, two are Independent and one is Liberal. My Noble Friend will give careful consideration to the question whether the Labour membership of the committee should not be increased forthwith.

Earl Winterton: May I ask the hon. and learned Gentleman whether it is the intention of his Department or himself, representing the Lord Chancellor, to issue a White Paper, stating if any departure is to be made in future from the ordinary practice of making justices of the peace? Is he prepared to issue a White Paper in view of a statement, which I cannot refer to in this House?

The Attorney-General: There is no immediate intention to issue a White Paper on that matter. Some discussion took place in the House a few days ago in regard to it, and the matter may be the subject of consideration by a Royal Commission.

Oral Answers to Questions — ROYAL AIR FORCE

Fencing Material, Outer Hebrides

Mr. M. MacMillan: asked the Under-Secretary of State for Air whether priority will be given to crofters in the Outer Hebrides as his Ministry's fencing materials on sites in the islands become due for disposal, in view of the shortage of wooden posts, etc.

The Under-Secretary of State for Air (Mr. Strachey): We shall be willing to sell to the crofters any fencing materials which are not taken over by the owners of the sites that we release in the Western Isles.

Our superintending engineer is keeping a record of crofters who have said that they might like to buy surplus material.

Mr. MacMillan: Is the Under-Secretary aware that the main purpose of the Question is to try to avoid the obvious waste of these materials which is going on? Can nothing be done about that?

Mr. Strachey: I will look into that.

Aircraft Accidents

Air-Commodore Harvey: asked the Under-Secretary of State for Air if, in future, he will allow details of all aircraft accidents involving fatalities to be made public immediately after the relatives have been informed.

Mr. Strachey: Yes, Sir. Press communiqués on accidents were not usually issued during the war. We have now arranged to issue communiqués again for all accidents involving fatalities which occur to aircraft on passenger-carrying flights. The communiqués will normally be issued as soon as the next-of-kin have been informed, but if necessary, a preliminary notification omitting names will also be issued.

Air-Commodore Harvey: Will the hon. Gentleman state why information relating to transport aircraft only, and not ordinary Service aircraft, can be given?

Mr. Strachey: That is returning to the prewar practice. It was carefully considered, and it was found undesirable to make a public announcement every time there was an accident of any kind to ordinary Service aircraft.

Air-Commodore Harvey: May we be given a quarterly statement, otherwise we shall not know whether the Air Force operate with few accidents or a great many? We should like some information on this subject.

Mr. Strachey: I will consider that.

Sir W. Wakefield: Is the hon. Gentleman aware of the great public anxiety at the continuing number of accidents in Transport Command, and will he cause to be published the very fullest information about the causes and reasons of these accidents?

Mr. Strachey: We are going forward extremely strongly on the subject of accidents, not only in Transport Command,


but in the trooping programme and the transport tasks of the R.A.F., and very active measures for limiting the rate of accidents are under consideration at the moment.

Mr. Bowles: Can the hon. Gentleman say whether the Government intend to have a public inquiry, not by the Air Ministry into the Air Ministry's own accidents?

Mr. Strachey: I do not think a public inquiry is called for at all. We are undertaking an enormous task in this matter, and we have by no means the best equipment to do it with; but we are at the moment, under great pressure, undertaking inquiries as to how to reduce the accident rate.

Mr. Gooch: asked the Under-Secretary of State for Air why the Secretary of State for Air refused to receive a deputation from the National Union of Agricultural Workers to discuss with him matters arising from the beheading of a woman land worker, due to the low flying of a R.A.F. aeroplane.

Mr. Strachey: As the proposed deputation wished to discuss a question arising out of the inability of the Ministry of Pensions to make an award under the Personal Injuries (Civilians) Scheme, my Noble Friend suggested that any representations the deputation wish to make could more appropriately be discussed with that Department. I understand that action in this distressing case is under consideration by the Ministry of Pensions.

Mediterranean (Home Leave)

Mr. Paton: asked the Under-Secretary of State for Air if he is aware that men in the R.A.F., posted to the M.E.F. area from the C.M.F. area while shortly due for home leave, find on their arrival in the M.E.F. area that there is no home leave scheme in operation there and are, therefore, being denied the home leave to which they are entitled; and will he take steps to remedy this.

Mr. Strachey: We have recently consulted the Air Commander-in-Chief, who tells us that there is a strong feeling among airmen in the Middle East Command that no leave scheme should be introduced there which might in any way hinder the

repatriation of those who have completed their overseas tour, or those who are due for release. Therefore, while I am sorry that we have not yet been able to set up a uniform scheme for home leave throughout the distant Commands of the Air Force, I think that for the time being we are right to start reducing the maximum period overseas, rather than to aggravate the existing difficulties arising from the shortage of manpower and transport, by starting a home leave scheme for this Command. We shall, of course, do all we can to make further improvements as soon as the present special problems have been overcome.

Mr. Paton: Is it not possible to remove the injustice which is complained of, by making sure that men who are within a short time of their home leave in the C.M.F. are not posted until after they have had their home leave?

Mr. Strachey: I know the matter to which the hon. Member refers, and it is one of great difficulty. 1 will look into it, but I cannot guarantee that what he suggests is possible.

Education (South-East Asia)

Mr. Scott-Elliot: asked the Undersecretary of State for Air whether facilities for educational and vocational training are as readily available to those serving in S.E.A.A.F. as they are to those serving in Europe.

Mr. Strachey: A.C.S.E.A. did not have the opportunity to make real headway with E.V.T. until the Japanese war was over. Consequently, we realise that facilities are not yet generally available there to the same extent as in other Commands; but we are doing everything we possibly can to help them to catch up as quickly as possible.

Mr. Scott-Elliot: Will the Undersecretary give an undertaking that everything possible will be done to speed up this matter as much as possible?

Mr. Strachey: Yes, Sir, but I think that the fact that A.C.S.E.A. is behind in E.V.T. is inevitable.

Mr. Pickthorn: Might we ask that Ministers, in using initials, should use only those initials which are perspicuous to persons of ordinary information?

Iraq and Persia (Duty-Free Cigarettes)

Major Wise: asked the Under secretary of State for Air if he will now arrange that duty-free cigarettes can be sent to all personnel at the Iraq and Persia R.A.F. stations.

Mr. Strachey: We are discussing this matter with the War Office and the Board of Trade. Members of the Royal Air Force serving in Persia and Iraq are, of course, entitled to a free issue of 50 cigarettes a week and to buy up to 75 a week duty free from N.A.A.F.I.

Recruits (Letters)

Sir William Darling: asked the Under-Secretary of State for Air if he is aware that recruits for the R.A.F., who go to the reception camp at Padgate, are not allowed to receive any communications from 10 to 14 days, the reason given being that as they have no number they have no official address; and, as their in ability to receive communications from their families is causing unnecessary anxieties, will he remedy this.

Mr. Strachey: Recruits receive an official number as soon as they arrive at Padgate. They stay there only for a few days, never more than six, and there is no question of them not being allowed to receive mail, but the recruits are advised to ask their relatives to postpone writing to them until they go to a more permanent address, because in this way there is likely to be less delay than if letters have to be forwarded from Padgate.

Sir W. Darling: Does the Minister appreciate that this regulation means that these young boys do not receive any communications from home, because their people have not their addresses?

Mr. Strachey: This request —it is not a regulation —was put into force for recruits because it was found that there was so much misdirection and delay in their receiving mail if they attempted to have it sent to Padgate.

Stranraer Depot

Mr. McKie: asked the Under-Secretary of State for Air if he will make any statement with regard to future plans for the R.A.F. depot at Stranraer.

Mr. Strachey: The Ministry of Supply and Aircraft Production is at present responsible for the depot near Stranraer, at

Wig Bay. We understand that the depot will be in use for some time yet. It is unlikely that the flying boat base at Stranraer itself will be needed again except for emergency use, in bad weather, for example.

South Burma

Mr. Belcher: asked the Under-Secretary of State for Air (1) if he is aware that R.A.F. personnel attached to 69 S.P., S.E.A.A.F., are still on half rations and that a large proportion of the food supplied is dehydrated and unpalatable; and will he take prompt action to remedy these conditions;
(2) if he will take steps to augment the quantity of fresh food supplied to R.A.F. personnel in 69 S.P., S.E.A.A.F.

Mr. Strachey: This unit is in South Burma, and I would refer my hon. Friend to the reply I gave yesterday to my hon. Friend the Member for Central Cardiff (Mr. G. Thomas).

Japanese Campaign Pay

Mr. Belcher: asked the Under-Secretary of Air if the Japanese campaign allowance is to be continued beyond 31st December, 1945; and if he will make a statement for the information of the R.A.F. personnel in S.E.A.A.F.

Mr. Strachey: At present I can only say that we do not propose to discontinue Japanese Campaign Pay at the end of this year.

Mr. Belcher: Is my hon. Friend aware that there is a rumour amongst R.A.F. personnel in South Burma to the effect that the campaign pay is to stop at the end of this year, and will he take steps to see that that rumour is corrected?

Mr. Strachey: Yes; if my hon. Friend will give me particulars, we will certainly look into it.

Demobilisation

Flying-Officer Bowden: asked the Under-Secretary of State for Air if the personnel of 53 Squadron, R.A.F., Merry-field, whose release under Class A has been stopped, are held back under the Military Necessity Clause; and why these men were not released and replaced by redundant aircrews from other commands.

Mr. Strachey: Yes, Sir. Fifteen general duties officers of this station have been retained under the Military Necessity


Clause. 53 Squadron is operating on air trooping, and Transport Command are already taking over all the aircrews who have the proper qualifications for this most responsible task.

Fleet Air Arm (R.A.F. Leave)

Mr. Lipson: asked the Under-Secretary of State for Air why R.A.F. personnel serving with the Fleet Air Arm do not qualify for R.A.F. leave under R.A.F. rules in respect of foreign service; and if he will take steps to enable them to do so.

Mr. Strachey: We have now decided that members of the Royal Air Force with service in His Majesty's ships based outside the United Kingdom, or in Naval shore establishments abroad may count all such service for the purpose of reckoning entitlement to overseas service leave under R.A.F. rules. We shall apply this decision retrospectively, but it will take a little time to deal with all the past cases.

Oral Answers to Questions — DOCKWORKERS' WAGES (COMMITTEE OF INVESTIGATION)

Mr. Eden: (by Private Notice) asked the Minister of Labour whether he has any statement to make on the progress of the negotiations between the two sides of the docks industry.

The Minister of Labour (Mr. Isaacs): At the outset of the negotiations, the problems of decasualisation were much in the minds of both parties, but there was a wide difference of view as to the basis on which the present discussions should proceed. I am happy to say that these differences were dealt with in the negotiations, and a basis reached which, subject to acceptance by a National Delegate Conference of the Unions concerned, will narrow the problem to the single question of the national minimum wage and the minimum guarantee to piece workers. A new basis of calculation for the piece worker has been discussed and tentatively agreed, and arrangements have been reached for dealing with the important problems affecting the future of the industry. This measure of agreement which, as I have already stated, is subject to ratification by a National Dock Delegate Conference, is contained in a document an abstract

from which, with the permission of the House, I will circulate in the OFFICIAL REPORT.
As announced yesterday, the unions found the employers' offer on the national minimum wage to be unacceptable. This offer, I am empowered by the employers to say, was for an increase from 16s. to 18s. a day. After careful consideration of all the cricumstances and of the great issues involved, I have decided to appoint a committee of investigation under the Conciliation Act to consider, in the light of the circumstances and on the basis of the document which I am circulating, the outstanding difference in regard to the national minimum wage and the piece workers' minimum guarantee, and to make recommendations. With the issue so narrowed, there is reason to hope that a report should be available at a very early date.

Mr. Eden: While thanking the Minister for his full statement, might I ask him within what time he hopes, or how quickly he hopes, that this report will have results, because I know he understands how urgent the timetable is?

Mr. Isaacs: Yes, Sir. The issue, while of great importance, is now a very narrow one. It is a question of how many shillings. We are proceeding immediately to appoint the committee, and it is our hope and belief that they should be able to reach a decision and report within two or three days. We will make an effort to that end.

Mr. Logan: As I have a Question down for next Tuesday, I am anxious to know whether the Minister will have any further information at the weekend? Will it be possible for him to give any further information on Tuesday?

Mr. Isaacs: I cannot be any more definite than I have been. Knowing what my hon. Friend has in mind about functions likely to take place over the week-end, I am hopeful that early next week we shall be able to report complete agreement.

Mr. McAdam: In view of the delicate state of negotiations, will my right hon. Friend take steps to see that the Press, particularly the "Daily Mail," do not publish the scare stories they have published on this matter?

Mr. Isaacs: I used to help to print newspapers. I would not like to be engaged now in stopping them.

Mr. Gallacher: In the event of the failure of an imediate settlement will the Minister lay down conditions under which the dockers should be employed?

Mr. Speaker: As I recently told an hon. Member on the other side of the House who began a question, "In the event of," that is obviously hypothetical and not in Order.

Mr. Gallacher: It is a very serious situation which exists.

Mr. Speaker: The hon. Member asked a hypothetical question and I stated that it was out of Order.

Mr. Gallacher: I will not ask a hypothetical question. I will ask the Minister if he will now lay down conditions under which the workers will be employed while negotiations go on.

Mr. Isaacs: I will not interfere with the running of the machinery.

Following is the abstract referred to:

Oral Answers to Questions — EMPLOYERS' REPLY TO TRADE. UNION CLAIM

We remain unconvinced of the justification for a wage advance under existing conditions. But to show that we are sincerely anxious to maintain the joint machinery and promote good relations, we are prepared on our side to make an offer. But we must attach conditions to it. These are as follows: —

On the first feature of our proposals relating to the scheme of decasualisation, we are anxious to bring this matter to a satisfactory conclusion at the earliest possible moment. We propose that the Council should proceed to discuss it and in the event of a breakdown in negotiations we should jointly ask the Minister for an independent inquiry in the terms of his assurance of 12th November, 1945 (Annexe). Both sides should undertake to make every effort to expedite the preparation of permanent schemes of decasualisation.

A Joint Committee of the National Joint Council shall be established forthwith with the following terms of reference: —
To examine the industrial arrangements of the Industry on the basis that there will be permanent schemes of decasualisation, and to report.

The Committee to be provided with an independent Chairman appointed by the Minister of Labour and National Service after consultation with the two sides. Where the Independent Chairman so agrees, on the instance of either side, the National Joint Council shall report a difference to the Minister of Labour and National Service.

Subject to the acceptance of the foregoing, our offer is as follows: —
(a) to increase the national minimum wage of time workers and the minimum guarantee to piece workers from 16s. to on the half daily basis:
(b) permanent men whose rates of pay are directly governed by agreements of the National Joint Council, to have their wages increased by per week:
(c) piece workers to receive 5 per cent. increase on existing piece work rates (i) in lieu of each is. per day flat rate increase being received under existing National Agreements and (ii) for each is. per day increase granted under (a) above, with proportionate increases for fractions of is. granted:

Provided (a) that this offer is not to be regarded as stabilising existing piece work rates or as precluding a local revision of such rates, and also (b) that it is without prejudice to any question of a national review of piece work principles.

As amended 27th November,1915.

Oral Answers to Questions — ANNEXE

Statement made by the Minister of Labour and National Service on 12th November,1945.

Oral Answers to Questions — DOCKS DECASUALISATION SCHEME

If no agreed scheme is in operation by the prescribed date, then, without prejudice to the Minister's power to prepare a scheme himself which would be subject to inquiry if objection were lodged, the two sides of the Industry can be assured that if a joint submission is made:

(a)setting out the extent of agreement between the two sides for the provisions of a scheme; and
(b)defining the issues on which the two sides have different views;
the Minister will, before preparing a scheme of his own, cause an independent inquiry to be held on the basis of the joint submission.

BUSINESS OF THE HOUSE

Mr. Eden: May I. ask the Leader of the House whether he has any statement to make about Business tomorrow, and also if he can give any indication of how far the Government hope to get today?

Mr. H. Morrison: With regard to the Business today, we should like to finish the Committee stage of the Finance Bill, but it is recognised that that may not be possible. With regard to Business tomorrow, in addition to that already announced for tomorrow, we hope there will. be time to consider the Lords Amendments to the Supplies and Services Bill and the Motion to approve the Greenwich Hospital and Travers' Foundation statement of income and expenditure.

Mr. Eden: May I ask the right hon. Gentleman to bear in mind, in relation to the Finance Bill, that we made good progress yesterday and that at least as much time was taken up by supporters of the Government as by hon. Members on this side and, as he is adding some more to the programme, may I ask if we shall not have to sit very late tonight and tomorrow?

Mr. Morrison: I hope not. I gather that good work was done on both sides of the Committee yesterday. I am not complaining and I hope that if reasonable progress is made, it will not be necessary to sit unduly late today and tomorrow. Fortunately their Lordships have not unduly interfered with the Supplies and Services Bill.

Orders of the Day — FINANCE BILL

Again considered in Committee.

[Major Milner in the Chair]

Clause 14 ordered to stand part of the Bill.

Clause 15.—(Increase of certain, reliefs for1946–47 and subsequent years.)

3.25 p.m.

Mr. Boothby: I beg to move, in page 13, line 48, at end, insert:
(3) Subsection (1) of Section fifteen of the Finance Act, 1925 (which, as amended by subsequent enactments, provides for a reduction of tax of an amount equal to one-tenth of the amount of earned income, but not exceeding one hundred and fifty pounds) shall, as respects the year 1946 –47 and all subsequent years of assessment, have effect as if—

(a)the words 'one-sixth' were substituted for the words 'one-tenth'; and 
(b)the words 'two hundred and fifty pounds' were substituted for the words 'one hundred and fifty pounds,'
and Subsection (2) of the said Section fifteen (which, as amended by subsequent enactments, provides, in a case where an individual or his wife is of the age of sixty-five or upwards and his total income does not exceed five hundred pounds, for a deduction of tax on an amount equal to one-tenth of his income) shall have effect as if the words 'one-sixth' were substituted for the words 'one-tenth.' 
After the gay badinage which the Committee enjoyed last night, I have in the cold light of day to recall hon. Members, and particularly the Chancellor of the Exchequer, to a more serious mood. Some of us on this side of the House do not take too tragic a view of the Surtax proposals of the right hon. Gentleman. Nor do we regard the Amendment moved yesterday as having done more than provide a convenient opportunity at an appropriate hour for the kind of Parliamentary frolic in which the Committee like to indulge, but this is a serious Amendment to which all of us on this side attach great importance. It seeks to restore the earned income allowance and also the allowance in cases where an individual or his wife is 65 of over, and his total income does not exceed £ 500. I am going to weary the Committee for a minute or two with a quotation from the Budget speech of the late Sir Kingsley


Wood in 1941, because it had a very direct bearing upon this question.
Sir Kingsley Wood said:
The present allowances from many points of view are not unduly generous, and many I know will feel that only the necessities of the time could possibly justify their reduction.…
The Committee will appreciate that the primary object of these proposals is not to obtain taxation for taxation sake nor to raise revenue for the sake of revenue, but to make a considerable cut in purchasing power during the war.…
He continued:
There are means by which that object can be achieved without necessarily sponsoring permanent reductions in these allowances. I am proposing therefore that the extra tax which any individual will pay by reason of the reduction in personal allowances and earned income allowance be offset after the war by a credit which will then be given in his favour by the Post Office Savings Bank. In other words the individual citizen will have to pay the tax in full, but that part of the extra tax to which I have referred, while complying with our vital wartime necessities, will constitute some provision for postwar difficulties and will, I hope, form an additional fund for postwar savings for himself and his dependants." — [OFFICIAL REPORT, 7th April, 1941; Vol. 370, c. 1328 –9.]
I would say to the Chancellor that that, in my view, constitutes what amounts to a definite pledge to the House of Commons. Let me quote a sentence from the Chancellor's own Budget speech. In his breezy way the right hon. Gentleman announced:
This will bring back all these allowances not merely to where they stood in 1941, when the postwar credits were instituted, but to the prewar level." —[OFFICIAL REPORT, 23rd October, 1945; Vol. 414, c. 1892.]
Yes, all except the most crucial and significant —the earned income allowance, the allowance for elderly people, and the allowance to children which is to be the subject of a subsequent Amendment.
Let us compare the points below which earned income will be exempt from taxation, first by the 1940 –41 personal allowance plus one-sixth earned income allowance; and secondly by the Chancellor's proposed personal allowance plus one-tenth earned income allowance. The single person under the 1940 –41 allowance will have £120; under the Chancellor's present proposals £122. The married couple with no children, under the 1940–41 allowance, £204; under the Chancellor's present proposals £200. A married couple with one child would have £264 under the 1940 –41 Budget, and £255 under the present pro-

posals. A married couple with two children, £324 under the 1940 –41 Budget, and £311 under the present proposals; and a married couple with four children, £444 under the 1940 £41 Budget, and £422 under the present proposals. The proposals of my right hon. Friend will, in fact, bring into liability for Income Tax more earned incomes than did the arrangements made in the 1940 –41 Budget; and I suggest most seriously that by removal of the post-war credits, without restoring the earned income allowance, the Chancellor is guilty of what amounts, in the light of Sir Kingsley Wood's statement, to a breach of faith to the taxpayer. That at any rate is my view. The right hon. Gentleman stated on 25th October in his speech on the Budget:
By my deviations from the 1941 position, however, leaving the earned income allowance for the moment as it is and giving these other additions, I have been able to clear a further 400,000 or so taxpayers from Income lax liability." — [OFFICIAL REPORT, 25th October, 1945; Vol. 414, c. 2305.]
I want to ask the right hon. Gentleman who these 400,000 taxpayers are. I have certainly had the greatest difficulty in finding them. They are not among those who earn the money by which they live. There is no doubt about that.
This Amendment raises very wide issues indeed. The cold and calculated omission of the Chancellor of the Exchequer to restore the earned income allowances reveals an attitude of mind on the part of His Majesty's Government which, if persisted in, may bring this country to something near to ruin. As the Chancellor of the Exchequer said yesterday, the rewards of public service are measured in terms of status, ribbons, and —on occasions —titles. The rewards of private enterprise are measured in terms of cash.
On any computation the Government propose to leave about 80 per cent. of the industrial field of this country to private enterprise, and over 90 per cent, of our export trade. Are they creating the conditions under which private enterprise can successfully function? Are they providing any incentives to induce the people of this country to work, and work hard, which they must do if they are going to survive during the next few critical years? The answer to both these questions can only be "No." The punitive taxation imposed by the Chancellor of the Exchequer with such breezy bonhomie, added to the diet of lemonade


and austerity prescribed by the President of the Board of Trade with such wry relish, is calculated to take the heart right out of industry at a very critical time.
3.30 p.m.
This country is bogged down. Anybody who has the temerity or the physical stamina to move about it can see for himself that there is a sense of futility and frustration among a great many workers. So it will continue as long as industry is crushed by a burden of taxation which is quite unjustifiable in time of peace, and no inducement is given to any class in the community to earn their living by hard work. Take, for example, a matter on which I personally have some knowledge, the case of fishermen. I could hardly make a speech without some reference to the fishermen. They have, for 20years, been unable to make ends meet. This year and last year, for the first time, they have had the chance to make a living and put something by. Have the Government under these earned income proposals, which vitally affect them, given them any inducement to go on fishing into the Autumn? They have in fact gone on fishing. They have done so under a sense of duty to the people of Europe, who are starving; but they have had no financial inducement to do so.
On what ground of principle does the Chancellor of the Exchequer justify this sudden and fantastic affection for the rentier, as against the producer? Is it the new Socialist doctrine? It is certainly not applied in Russia. We are told by the experts that we are now entering a new era, which has been aptly described by Mr. James Burnham as the era of the managerial society. They include not only the administrators of industry, but scientists, technicians, trade union leaders, professional experts of every sort —it is on these key men that the future economic well-being of this country must largely depend. They must, therefore, not merely be given a chance but also some encouragement. At present, they are being given neither.
Personally, I would like to see the principle of differentiation between earned and unearned income applied far beyond the scope of this Amendment. I would like to see it carried into the Surtax field, and beyond. The man who makes a living, active contribution to the welfare of the commun-

ity should benefit as against the man who merely inherited a fortune from his grand-father. I should have thought that doctrine would have appealed to hon. Members opposite. But not at all, they prefer the man who inherits a fortune. Mean-while, this Amendment does at least help the class which stands in most need of immediate relief. If the Chancellor of the Exchequer refuses this Amendment, he had better go the whole hog and bring the President of the Board of Trade down to the House to move a new Clause exempting hair shirts from Purchase Tax; and let us go right ahead into austerity in a big way. If he refuses to accept this modest Amendment, which applies to a class of people who are largely responsible for returning hon. and right hon. Members to power, he will himself go down to history with an unenviable reputation as the champion of the rentier and the scourge of the worker.

Mr. I. J. Pitman: It is with great pleasure that I support this Amendment. This is an issue on which I feel very strongly. It is a difficult issue to understand, and it has been made much more difficult because of a certain amount of confusion that has been brought into it. The Chancellor of the Exchequer paid me the compliment of interrupting me on one occasion to say that my arithmetic was wrong. It was arithmetic on a chart. He has had that chart for a number of days, and I think it is now clearly agreed that the arithmetic was right; and, following his statement at the end of the Second Reading Debate, it is accepted that 1,250,000, or about ten per cent., of the taxpayers have suffered through the change in the earned income allowance.
We must get this clear because there is confusion in this matter. I think it would help if we thought in terms of what one might call "out of pocket extraction." That can made up of two figures — the forced saving of postwar certificates, and the taxation proper. The postwar forced saving is not taxation in respect of that year. It is common ground that that certificate will be honoured at some time, and therefore any man who is suffering only under forced saving is not suffering taxation. Taxation is an amount in respect of a particular year. There are 1,125,000 people, all working men, who have suffered this increase of taxation which the Chancellor of the Exchequer himself admits.
I want to make clear that this worsening of the situation, this increase of taxation, begins to occur at a very low point. I should say that everybody would agree that £3 18s. 4d. is not a big income for a married man and his wife, yet that man has to pay 10s. 10d. more Income Tax under the Chancellor's Budget than he had under the Budget of the right hon. Member for the Scottish Universities (Sir J. Anderson). That is happening at a time when the £ 5,000 a year man — and the Chancellor himself is a very good instance in that category—

Mr. Sydney Silverman (Nelson and Clone): Docs the hon. Member say that such a man would pay some 10s. more under this Budget than under the immediately preceding one, or under some previous Budget?

Mr. Pitman: Under the immediately preceding one, and the one preceding that. A married man with no children, drawing £5,000 a year —in which category I think the right hon. Gentleman is himself —is having a relief of over £219 a year.

Mr. Callaghan: Will the hon. Gentleman tell us to which table in the financial statement he is referring?

Mr. Pitman: That is a point I am coming to later, that these tables are definitely misleading because they dc not take postwar credit into account. The Chancellor of the Exchequer has had this graph, which I have here, and which shows that the peak occurs at £ 204 a year — which is £ 3 18s. 4d. a week. A working man drawing that amount is made to pay 10s. 10d. more tax in this Budget; whereas a £5,000 a year man —I admit that this is wrong, to a small extent because I am using the right hon. Gentleman's own tables —gets a benefit of £219 12s. 6d. I am dead certain that in my own constituency there is not one elector, even among those who voted for other candidates, who would not join with all my supporters in saying most firmly that it is wrong that in a period of victory, for which we thank God, the Chancellor of the Exchequer should impose additional taxation on the small working man, while relieving taxation on the £ 5,000 a year man.
That is not the end of it. As £3 18s. 4d. is not a round figure, I have taken £4 a

week as the round figure, and £1 2s. 6d. per additional child. These figures represent what the working man earns. They are not figures of a Subsection under any Beveridge or other plan at the expense of the taxpayer, but the earnings of the working man himself. I have had prepared this graph showing the way in which, at £ 2 a week per head for the father and mother, and £ 1 2s. 6d. for each child, the earnings are taxed. In blue you have the situation as under the Budget of the right hon. Member for the Scottish Universities, and in red you have the Budget proposed by this Socialist Chancellor of the Exchequer. It shows that in addition to "soaking" the small married man who has no children, the degree of "soaking" goes up, the more children that poor working man has. That is the point I want to bring home.

Mr. John R. Thomas: Before the hon. Member puts the graph away, will he inform us what the steps represented on it involve in pounds, shillings and pence?

3.45 P.m.

Mr. Pitman: I can give it in figures from the table. I was going to give the table and the graph to the Chancellor, as I did my last graph. This line on the graph represents 1. Every one of these people will be paying that amount more than £1. Here you have £ 2, here you have £ 3 and at the top £ 4. The man with six children pays an additional tax of £ 3 9s. 3d. Again, that is not the sum total of the enormity, although this is by way of an anti-climax. Owing to the reduction from £165 to £125, at the point at which the highest rate of tax occurs, we get at a much earlier stage in a man's career the incidence of 9s as distinct from 6s. 6d. under the old tax, and for that period he is suffering a penalisation because he is paying at the higher rate earlier than he used to pay in the old days.
I would like to make this clear. In the initial Budget statement the Chancellor said quite clearly that everybody in the nation would benefit. He is perfectly right in terms of total out-of-pocket credit extraction, but if you treat, as you are treating, the post-war credit certificate as enforced saving and not taxation —it came out of Lord Keynes' plan; and I am sure nobody in the Com-


mittee would wish to treat it as taxation if it is going to be paid back —then it is true from the Chancellor's own statement, that 1,250,000 working men and women in this country are being penalised. He said that first of all, on an earlier occasion in his Budget statement in this House; then he said it on the wireless, and then again in the Second Reading Debate. Worst of all, if I may say so with great respect, he said it in these tables. If I look at the £ 200 a year man, who on the chart is having no increase, here he is shown as saving 1s. 3d., plus a ½d. or a ¼d.

Mr. Callaghan: With great respect, that is the effective rate of tax on the 1940–41 charge.

Mr. Pitman: Yes, but in the other column it will be found that in the proposed charge there is a nil," so that this table purports to show that that man has saved in taxation.

Mr. Callaghan: Yes, he is saving £13.

Mr. Pitman: One shilling and three pence halfpenny.

Mr. Callaghan: I am sorry to interrupt, but the is. 3½ d. has nothing to do with it. It is the effective rate, and appears in column 5. It is obtained by dividing £ 200 into the amount of tax he pays— £ 13. Next year he is paying nothing at all. On a salary of £ 200, earned income relief is £ 20, personal allowance is £ 180, total £ 200 — tax nil.

Mr. Pitman: I am sorry. I was reading the wrong column, but it actually strengthens my case, because in this table he is shown as having a saving of £ 13, whereas in point of fact he is not saving at all. Here it is on the graph. I have made a careful study of this. These tables of the Chancellor's are based on the assumption that enforced saving is a form of taxation. It says "Income Tax" at the top, but it does not confine itself to Income Tax. It brings in this enforced saving of postwar credits. In terms of postwar credit, this man is £13 better off, but in terms of taxation he is not better off at all. He is exactly where he was with £200. If he goes up to £204 he pays 10s. 10d. more That is one of the points that has to be borne in mind. This matter has been a

confusion to the whole country, and I think it is right that we should bring it out and air it in this Committee.
I ask myself why these facts are true. I quoted in this House the definition by Mr. Gladstone of a budget, that it was a policy for the determination of the welfare of the individual, the relationship of the classes and the fate of the nation. To settle the relationship of the classes and the fate of the nation on a basis by which you penalise the poor working man earning £3 18s. 4d. a week, and giving a substantial benefit to the £5,000 a year man, seems to me to be wholly wrong.
The Chancellor asked us to regard this subject as the first in a five-year plan. If this is the first step, I shudder to think what the final result will be. What is going to be the cost? Last Thursday I put down a Question to the Chancellor, asking him how many people there were in each class, and how much it would cost to give them back their earned income allowances in this respect. I have not had a reply from the Chancellor, although I gather he is going to give it. Why is there this confusion? When he brought in this Budget, did the right hon. Gentleman know that these tables and those statements of his were confusing or not? If he did not know, how can we justify paying £5,000 a year, providing a car and a further £219 a year, to a Chancellor who is unaware, when he introduces a Budget, that the effect of that Budget is to penalise the small man and benefit the rich one? I think hon. Members opposite are going to be in a dilemma. They will go on record as being determined —even when attention was called to it —to continue this increased taxation on the small working man at a period of European and world victory, or else they will have to get some Chancellor who will not get them into such a dilemma again. I was very interested the other day to hear an hon. Member opposite say we had a Chancellor who was six feet of solid democracy. It is not for us to say whether the top nine inches fall within that definition.

Mr. Norman Smith: We have heard this Amendment justified by two hon. Members opposite, one of whom, the hon. Member for Bath (Mr. Pitman), I may describe as a high priest of orthodox finance, and the other, the hon. Member for East Aberdeen (Mr.


Boothby), who, so far from being a high priest of orthodox finance, has by his speeches for many years persuaded me to regard him as unorthodox where finance is concerned. There is only one thing wrong with the Amendment. It is just a little untimely. I hope that the hon. Gentlemen will bear that in mind when the next Budget comes in April, or possibly a year later than that. It is only a matter of timing. After all, we are dealing with money, but money is a somewhat intangible sort of commodity, as many hon. Members opposite know perfectly well, and money has value only so far as it can be exchanged in shops for goods. What I admire about the Budget of my right hon. Friend the Chancellor of the Exchequer is the complete balance of the whole thing. I welcome the newly found enthusiasm of hon. Members opposite for the welfare of the working classes. It is a marvellous thing. Incidentally, the argument used by the hon. Member for East Aberdeen about the country being ruined is cancelled out by the arguments which were used from the Front Bench opposite last night. Either of the hon. Gentlemen is perfectly competent to be Chancellor of the Exchequer one day. I only regret that, at the age of 50, I probably shall not live to see it. I hope my right hon. Friend will reject this Amendment because it is untimely. My right hon. Friend has designed the whole Budget very carefully to preserve the value of the sterling. This Amendment, and others of a like character, if persisted in, will undermine our whole financial basis. That is where this intangibility of money would come in. I beg my right hon. Friend to resist this Amendment and preserve intact the structure of this Budget which, in my humble opinion, is a very fine thing.

Lieut.-Colonel Nigel Birch: The Chancellor originally recommended his Budget on the grounds first that it was part of a five year plan, and secondly that it was an incentive Budget. An hon. Member has referred to the five year plan. I think we would be out of Order in discussing this on this Amendment, and an additional difficulty is that it does not exist, so far as we can see. I think the question of incentive is wholly relevant. My hon. Friend the Member for East Aberdeen (Mr. Boothby) has referred to the spiritual lassitude now descending on this country, and I feel

that one of the reasons for that is the general feeling of the man in the street that if he does not lose his money on the swings, the Government will pick his pockets before he gets off the roundabouts. There is no doubt at all that this sleight of hand, as was clearly demonstrated by my hon. Friend the Member for Bath (Mr. Pitman), will very much encourage him to take that view. He loses his money when he gets off the roundabouts. First of all, he is told that he has not lost it and he must look in his pockets again. Then he finds that the £3 10s. 0d. that he is told he has not really lost, is only a piece of paper, and that if it had been a bottle of beer which had been taken out of his pocket it would have been a very much more serious matter.
The Chancellor's defence of this Measure was over-subtle and wrong headed, and reminded one of the early Church controversy about the year A. D. 600. What he actually said was:
You may delight in believing that you own something, a piece of paper; but you only turn it into delight when you are able to spend it on something like entertainment, —the living stage, cricket and so on.
He added:
Some people may think only about capital investment and arrangements for the future, but the common view is that it is your income which you can spend that matters.' —[OFFICIAL REPORT, 19th November, 1945; Vol. 416, c. 145 and 147.]
I wonder how true that really is. Suppose the Chancellor were to offer me or one of my hon. Friends £1,000,000 in postwar credits.

4.0 p.m.

The Chairman: So far the hon. and gallant Member has not been addressing himself to the Amendment at all. Instead he is making a Second Reading speech.

Lieut.-Colonel Birch: I apologise, Major Milner. The point I was trying to make was that this was not an incentive Budget, and that though, through the earned income allowances, people appear to be better off they are being taken in by these postwar credits. I was really making the same point as my hon. Friend behind me. To compare bottles of beer with pieces of paper like postwar credits is both wrong and extremely dangerous. I should very much like to know what the effect of such a view will be on the savings movement. That may be out of Order, but I have


tried very hard to support that movement in my constituency and have spoken more than eight times to tell my constituents that bits of paper which are Government promises to pay are worth something and should be acquired, and that with them they may be able to buy two bottles of beer later instead of only one now. If one takes seriously the arguments of the Chancellor it knocks the bottom out of the argument used about the savings movement.

Mr. David Eccles: I would like to say that I agree with all that my hon. Friend the Member for East Aberdeen (Mr. Boothby) has said. I know that to restore the earned income allowance would cost £100,000,000, or perhaps a little more. We have no figures in front of us of expenditure, and therefore it is not really possible for us to tell what we should be doing if we pressed for large reliefs in taxation; but even supposing it was £100,000,000 or more I think it would be too much money to put into circulation at this moment. I think the Chancellor is absolutely wrong in having preferred the kind of reliefs which he has chosen, especially, for instance, the is. off the standard rate of Income Tax. I disagree entirely with the hon. Member for South Nottingham (Mr. N. Smith) when he said that this Budget was in balance. It is precisely because I do not think the Budget is in balance that I put my name to this Amendment. The feature of the taxation proposals is that they encourage personal spending and discourage enterprise, and I object to our doing that at this moment in our history. After all, the next General Election is some way off and what the Chancellor wants now is goods and not votes, and yet he has preferred to distribute his favours on the basis of gaining popularity and not stimulating production.
I ask the Committee to consider why it is so necessary to stimulate the desire to produce. I do not think the average man or woman is born with a desire to work really hard five and a half days a week. Hundreds of years ago men worked because they were afraid of physical punishment, because they were slaves; but little by little we got rid of slavery, and then the major inducement was starvation, or fear of starvation. But now quite rightly, we get rid of that

sanction by proposing to guarantee some thing like subsistence from birth to death. If both those historic sanctions to work hard have disappeared, for what motive are people going to work hard in the future? That is where this Amendment comes in because it is designed to stimulate the only motive that we know will work with the majority of human beings. I know that some hon. Members opposite believe that British men and women will work like ants, or some other industrious insect for the State, but we have absolutely no proof that this is so. I would call the attention of hon. Members to an interesting pamphlet written by the Member for East Cardiff (Mr. Marquand), who is now Parliamentary Secretary of the Department of Overseas Trade. I cannot re member the date of the pamphlet, but it was after he left the service of the Ministry of Production. In that pamphlet—

Dr. Morgan: Is this in Order, Major Milner?

The Chairman: The remarks of the hon. Member seem to me to be in Order.

Mr. Eccles: In this pamphlet he pointed out that the direction of labour alone had not been sufficient during the war to induce workers to go from civilian industry to war industry, that in every case of major expansion in the munitions industry higher wages had to be offered than in the industry from which the labour was coming. That is not surprising, but it is a very interesting fact, and it shows that British men and women require financial inducements to work.

Major Cecil Poole: Surely the hon. Member knows that millions of people in Civil Defence did voluntary work for the State during the war without any reward?

Mr. Eccles: I am very familiar with that, but I am now talking about the mass of producers, and the fact that we offered higher wages when they moved from civilian to war industry, and now that they are required back in textiles or in the coalmine we find that they will only go back, and quite rightly, if there is a higher wage awaiting them. In the negotiations that are going on now over wage scales in civilian industry there is not one glimmer of idealism or Socialism.


Everyone is looking naturally for greater monetary rewards. I think it is true to say that human nature is very much like the donkey, in that it will only budge if it has a stick behind it or a carrot in front. We in this country will not tolerate the stick, and therefore we must adopt the carrot. and that is what this Amendment does. It is designed to improve the carrot. Hon. Members who put their names to this Amendment have in mind that we believe that a sharper distinction between earned and unearned income in the matter of taxation is necessary in the future and we are anxious about the volume of production.

Mr. Stokes: Will the hon. Member bear in mind that the only way of getting money out of the employers is by means of the stick?

Mr. Eccles: Both the hon. Member and I, like many other people, work either for a salary or for the sense of pride in the business, and mostly it is a combination of both. We are anxious about the prestige and prosperity of this country, which depends on the volume of production, and we feel that the Chancellor, in not restoring the earned income allowances, has taken a wrong course. In fact, what he has chosen to do is to stimulate personal saving, not to promote enterprise, and I ask him seriously to consider whether he would not get a bigger revenue into the Treasury in the next few years if he were to accept this Amendment. This is a case of priming the pump, and I hope that he will consider it and that, if he cannot grant today what we are asking for, it will be at the top level for consideration in his next Budget.

Mr. S. Silverman: I understood the argument of the hon. Member to be that this was a good Amendment because, if we did not pass it, we should destroy the incentive of people to work. Then he put forward the other argument that the Budget was drawn in the way it has been drawn, in order to please the majority of people. Would he tell me how he would please the majority of people by destroying their incentive to work?

Mr. Eccles: What I. said was that this Amendment, instead of destroying, would encourage the desire to work. That is perfectly clear. Even the hon. Member

works harder if he is getting something for doing so and the only reason I can gather why the Chancellor prefers his distribution of allowances and rebates was because —though this does not seem to be accepted on all sides of the Committee —agreater number of people would be removed from Income Tax altogether.

Mr. Silverman: The hon. Member said he went for popularity instead of increasing production.

Mr. Eccles: Nothing would be more popular than removing people from Income Tax. I am asking the Chancellor to be a little less anxious to be popular, and a little more firm in stimulating production.

Mr. Silverman: The hon. Member has not answered my question.

The Chancellor of the Exchequer (Mr.Dalton): We have listened to a number of interesting speeches in support of this Amendment. It is true, as has been said by my hon. Friend the Member for South Nottingham (Mr. N. Smith), that not all hon. Members opposite have approached this problem from the same starting point. The hon. Member for East Aberdeen (Mr. Boothby), in moving the Amendment, assured us, referring evidently to the proceedings of last night, that this, at any rate, is a serious matter, and therefore I hope that I shall be able to treat it seriously. We have to set some limit, as the hon. Member for Chippenham (Mr. Eccles) appreciated, at this very early stage in the postwar era to the tax reductions that can be given having regard to the fact that there is still a risk, is there will continue to be for some time, of inflation. It is common ground all over the House —the view was not challenged when it was first put forward and therefore I need not elaborate the argument —that if we liberate a large amount of purchasing power through tax reductions of one sort or another, there is a danger, during the period when we arc reconverting industry, that there will be too much money and too few goods, with a resulting inflationary movement, and that, we all agree, would be most disastrous.

Mr. J. Pitman: I should not agree as regards the small man.

4.15 p.m.

Mr. Dalton: I will discuss some of the figures which the hon. Member has shown


on the chart he sent to me in a moment. I want to begin with the general consideration which lies behind the policy in the Finance Bill.
The general consideration is that, on the one hand it is desirable to give as much stimulus as possible to economic activities of all sorts. I will challenge, if I may, in a moment, the suggestion of the hon. Member who moved the Amendment that there is no stimulus to private enterprise in this Finance Bill. On the other hand, we must not give too much tax reduction now or there will be a serious risk of inflationary developments which everybody would deplore, including the hon. Member who has been long and honourably associated with the Bank of England. So far as I know the Bank has always had a deflationary rather than an inflationary bias in the past, so I do not expect to find the hon. Gentleman disagreeing with me on this point.
The question, therefore, is, How much can we safely promise to let loose in terms of additional purchasing power through tax reduction, while keeping within the bounds of prudence, so far as inflationary risks are concerned? I formed the view, in the light of the discussions which I had with various advisers, that we could let loose something of the order of £ 300,000,000 a year, starting from next April. I am not now speaking of E.P.T. or of the other arrangements. I think that would be striking a balance between the inflationary risk and the need to stimulate people by tax reduction. It seemed to me —one cannot be exact in these matters —to be about the order, in respect of relief of Income Tax, which could be promised now. Of course, when we get to April, things will be clearer, and we shall see better. It may seem then that we ought to hold on to the position, or we may be able to go forward.
The Committee is discussing whether, at this point and today, we should decide in favour of a further adjustment for earned incomes. That is all we are discussing now. We are not discussing whether next April it might be right or not. None of us can tell how things will go between now and then. So far as the Finance Bill is concerned, I thought that £300,000,000 was about what we could spare in terms of Income Tax reduction. There were all sorts of alternative ways

of doing it. Combinations of reliefs and remittances were possible to make up roughly that figure. It has often been suggested, and I have denied it and I deny it again; that not only did I not think about the possibility of this earned income reduction but that it did not occur to any of the officials of the Treasury or of the Inland Revenue who advised me on these matters, and that we were all taken entirely by surprise by the brainwave of the hon. Member for Bath (Mr. I. Pitman) when he announced it in the Budget Debate.

Mr. Pitman: I think the right hon. Gentleman is unfair. I do not think any body on this side has said that the question of the return of the earned income allowances was not considered by him. What we are complaining about is that now it produces some curious results in special cases, where £1,250,000

Mr. Dalton: I am coming to all that. 1 would like to get on to it. It is not the case that nobody has made this suggestion. It has been made by a number of speakers at various successive stages when this Bill has been considered. They have said, "It does not look as if the Chancellor has ever thought of this. Here's a bright new idea." I merely beg to assure the Committee that not only did I think of it myself, but that I discussed it at considerable length with my various advisers, and that it was obviously one of the starters.

Mr. Boothby: Perhaps the right hon. Gentleman will do me the justice of acknowledging that I said that this action on his part was cold and calculating.

Mr. Dalton: Yes, that is so. We are very well acquainted. We understand each other's language and states of mind. It has been suggested more than once, and I want finally to remove this suggestion, that nobody in the Treasury or the Inland Revenue, nor I nor any of my colleagues in the Cabinet, ever thought of the possibility of adjusting the earned income allowance until we came down to the House. Then up rose some hon. Gentleman representing Bath, or wherever it might be, and put this thing before us.

Mr. W. Fletcher: Mr. W. Fletcher (Bury) rose—

Mr. Dalton: I think I had better get to the main part of my argument. These


were the alternatives. I must apologise to the House, and particularly to those new to our procedure on the Finance Bill for having to say the same thing the third or fourth time, but that is how we work at the present in these arrangements, and repetition is quite unavoidable. As I have said on a number of previous stages in our Finance Bill discussions, it would have been easy, and it would have been the line of least mental effort and the line in some respects of least resistance, merely to have reproduced the exact scheme of allowances as they were in 1941, when the postwar credit was invented by Sir Kingsley Wood. That would have been easy, and it would have been cheap in terms of what I thought we could spend in Income Tax reliefs. To have done that would have cost about £225,000,000. I considered that as a possibility, and I definitely rejected it in favour of what I am proposing to the Committee now and which costs the Treasury a bit more than the mere reconstitution of the Kingsley Wood scheme. My proposals will cost the Treasury round about £300,000,000 in a full year.
My Budget proposals do however contain, as I have repeatedly explained and must once more say, certain reliefs which are going further than the Kingsley Wood allowances. They result in increasing certain Income Tax allowances beyond the point at which they stood in 1941. I will not again go over the very familiar and well-trodden ground, but would just refer to the personal allowance for Income Tax, both for the single person and the married person. The exemption limit, of course, will go back to where it was. In those two cases, the allowances are carried back not merely to where they were in 1941, after two years of war, but to prewar. We therefore get a larger total number of taxpayers completely relieved from Income Tax by reason of the operation of the allowances for the single person and the married person.
Suppose that I had merely put the personal allowances back to where they were before. Suppose I had gone on and readjusted the earned income allowance as is now proposed; 1 should not have been able to afford to reduce the standard rate by Is. in the. That is a matter of judgment as to which is the better and gives the greater incentive. There are a number of things in this Budget which, I shall argue, have had a stimulating effect on

those who are in a fit state to be stimulated. Nothing would stimulate some people, but persons who are reasonably subject to stimulus, of whom there are great numbers, will, I think, have got a lot more stimulus and kick out of the standard rate coming down a "bob than by any playing around with the allowances. Reducing the standard rate by is. is a simple, intelligible and encouraging operation, and although it has cost a bit more, I am sure that it is worth while to make that cut.
The hon. Member for Bath speculated —although that is not the right word for anybody who is connected with the Bank of England, and perhaps I should say "surmised"—that if the thing were put to a body of electors in his constituency he would get more support for the proposition that it would have been better to restore the earned income allowance than to cut the standard rate. He evidently thinks that he would have got a lot of votes from those who voted for the other candidate at the Election. I doubt it, and after all there has not been a by-election in Bath. Here is the right hon. Member for Bournemouth (Mr. Brendan Bracken). He has recently come to us as a result of a by-election which we watched with great interest. I suppose this is the sort of point that the right hon. Member put at Bournemouth. I fancy that some of the speakers who supported the very distinguished Air Force officer who opposed the right hon. Gentleman in the Labour interest regarded this Budget of mine as rather good. I should not have been at all surprised if that argument had been used.

Mr. Brendan Bracken: I must apologise for having to disappoint the Chancellor of the Exchequer, but nobody was in the slightest bit interested in his Budget in the town which I now represent.

Mr. Dalton: Well, many thousands of voters were not much interested in the Conservative candidate. [Hon. Members: "Oh."] I am merely making the point, which was suggested to me by the physical presence of the right hon. Gentleman on the Front Bench opposite, that the hon. Member for Bath was talking about what would happen if he made a speech in Bath and the vote was taken afterwards. Perhaps the hon. Member went to Bournemouth and made a speech there. Perhaps he will tell us.

Mr. Pitman: We have not yet been told the cost of the Amendment. It may well be that the correct answer is that the right hon. Gentleman could give us both, which is what we are asking for in this Amendment.

Mr. Dalton: Asking for the fish and the chicken as well. Well, the food supplies do not run to that. We have to have a simple austerity meal at present. The point I am making is not a frivolous one, as the right hon. Gentleman would be the first to admit.

Mr. Bracken: As the right hon. Gentleman makes that point, may I say that a joke in his mouth is no laughing matter?

Mr. Dalton: We were being challenged with the statement that if a contrast could be made between what I am proposing in the Finance Bill and what the hon. Member for Bath was proposing, namely, no reduction in the standard rate but instead — [HON. MEMBERS:
"No."] Yes, it was instead —of that a restoration of the earned income allowance, he thought that the majority of the electors of all parties would prefer the restoration of the earned income allowance to a reduction in the standard rate. It is a perfectly reasonable thing to say.

Mr. Osbert Peake: I think the right hon. Gentleman may be confusing the hon. Member for Bath (Mr. Pitman) with the hon. Member for Chippenham (Mr. Eccles).

Mr. Dalton: If it was so—

Mr. Pitman: That may be so. The record will be in HANSARD tomorrow and it will be quite clearly shown that I said that my electors would disapprove of a working man with a wage of £3 18s. 4d. paying 10s. 10d. extra tax in the year of victory when the Chancellor is getting £219 extra.

Mr. Dalton: The argument has been used. Perhaps it was the hon. Member for Chippenham (Mr. Eccles) who said it. Never mind. It was from the West Country somewhere, one of the few remaining places where the Conservative Party can get in. I am sorry if I got it wrong. I will deal with the argument as coming from the hon. Member for Chippenham. He worked with great distinction in the Ministry of Economic Warfare when I was there, and I am very

pleased to see in this House. I merely say this, to finish this stage of the argument, that this is not a matter of theory but of practice. There have been a number of ocassions since by Budget was introduced for the electors to say whether they preferred what I propose or the alternative proposals of the Conservative Party. So far, they have been, on the whole, on my side for the most part. In Bournemouth—

Mr. Bracken: The right hon. Gentleman should not spend so much time talking about by-elections. The right hon. Gentleman is Chancellor of the Exchequer, though he does not seem to recollect it. He has been given a number of questions of a very serious character to answer, and I think he would do it much better if he replied to some of those questions instead of making so many taunts about by-elections.

4.30 p.m.

Mr. Dalton: I am very much obliged for all this guidance —it is most helpful —but if the right hon. Gentleman will sit tight I shall get on better. What I said was directly relevant to arguments from the other side which were supposed to show what public opinion thought of these proposals. I have said that £300,000,000 is as much as I think I can give in tax relief. The proposal is to give another £105,000,000 in a full year. If you add that to the relief I have given you will be running in my view a serious inflationary risk and I am not going to run that risk. The alternative would be to substitute another allowance within the £300,000,000 limit and I am not prepared to do that either, because I think the other allowances are in the aggregate better than the alternative. The other allowances, it will be remembered, involve a regrading of the standard rate so that the first £50 of taxable income is only charged at 3s. in the pound and the next £75 at only 6s. That has an indisputable effect on the effective amount of cash at the lower levels of income.
This financial statement means exactly what it says, so what will be the spendable income, or if people choose the save-able income, next year? In the case of a great variety of incomes the taxpayer is going to be better off. I repeat, because it has been challenged, that in terms of income next year everybody will be better off, including Surtax payers


at the one end and the people relieved of taxes at the other end. The argument which has been applied on many occasions in previous Debates says "Yes. but you should take account of the postwar credits and if you take account of the fact that postwar credits will not be credited in fact next year you will find that some people will lose." It is perfectly true that in some cases that will be the result, as I have admitted on previous occasions, but I say that this argument is somewhat fantastic because the postwar credit is not going to be repaid next year. It will, of course, be repaid at a date to be determined in the light of the risk of inflation, the growth of production, and so on. It is a credit, but as the late Sir Kingsley Wood who invented it made abundantly clear, no date can be fixed when it will be repaid. I am not yet in a position to fix that date. I have made it clear that the date when credits can be released must depend on the general position and particularly upon the balance between production and consumption.
It would be very wrong, indeed it would actually destroy the full purchasing power of these credits, if they were released prematurely so that prices were forced up while goods were scarce. Therefore it is obvious that payment ought to be postponed for a season. It may be that they will be repaid by stages. I shall, of course, give full attention to the matter and fix a date when they can be repaid, but I must be influenced —very greatly influenced —by the consideration I have just mentioned. Next year therefore the post war credit will not be spendable. I say frankly it cannot be next year, and that being so it is artificial to treat this credit as being part of a man's income next year. The arithmetical basis of the argument is a rotten foundation.

Mr. Pitman: Mr. Pitman rose—

Mr. Dalton: I think that it would be better if the hon. Member —he is a bit of a jack-in-the-box —would let me get on without interruption, and I will deal with his point. Let us suppose that the foundation is not rotten and that it is reasonable to count the postwar credit which will not be credited to the person concerned next year as if it could really be properly treated as part of his income next year. Even on this basis, as I have previously told the House, out of

13,000,000 Income Tax payers not more than 1¼ million at the outside will be worse off according to the argument produced from the other side of the House, while 11¾ million will be better off, under the proposal I am making, than under the alternative proposal made from the other side of the House. It may be that 1¼ million is a high figure —when I say a high figure I mean that I have been given that figure and I accept it because I am anxious not to understate the possible number. It may be that there are not as many. I take the figure of 1¼ million in order to give the benefit of the doubt to those who have put this case. It may not be as many, and perhaps those who benefit may be more than 11¾ million.
What is the extent of this potential grievance, if I may so describe it, not using the word in any offensive sense; what is the extent of the amount to which people, even assuming the basis of the argument to be true, will be really worse off by reason of the arrangements which I have made? I will give particulars which I have had worked out. Let me take the taxpayers in groups. Every unmarried taxpayer gets a reduction in tax which is greater than the postwar credit. The unmarried taxpayers are all well in. Furthermore, the great majority of the married taxpayers are also advantaged by my arrangements as compared with the arrangements proposed from the other side. About 80 percent. of the 1¼million people to whom I have referred fall into two classes —married couples with no children and married couples with one child. Let me take first the married taxpayer with no children. There are certain bands of income, as they are called by those who work out these things, and those whose income lies between £200 and £207 and those whose income lies between £388 and £567 will be disadvantaged on the basis of calculations from the other side, which I do not admit to be valid, but which I take for the sake of clearing up the point.
But how seriously are they disadvantaged? That is the point. Within these limits the amount by which the no-longer-granted postwar credit would exceed the direct income tax reduction varies from sums of a penny or two up to a maximum of £1 18s. 8d. per year. That is the maximum grievance, if I may use that word, which could be manufactured


by any married taxpayer with no children. Very few will be at that maximum level. For the great majority it is a question of shillings rather than pounds by which they are disadvantaged. Then take the other group of married couples with one child. There again there are bands of income within which this grievance may be argued to exist. Those incomes are between £256 and £272 and between £435 and £781. In their case the maximum of the disadvantage is £3 14s. 8d. a year.
Here again, in the great majority of cases, the difference will be a matter of shillings rather than of pounds. In the light of considerations such as these, it is really making very heavy weather when the Opposition marshal all their guns on this particular Amendment. In reply to the closing remarks of the hon. Member for Chippenham (Mr. Eccles) let me say that, of course, it is not ruled out that an adjustment of the earned income relief may be both possible and desirable, if not next April, then the April after that. One must never be so foolish as to commit oneself —and I do not commit myself —but I should think that it is by no means out of the question that before this Parliament comes to an end, it will be obviously sensible to make this particular adjustment. But it cannot be made now in this Budget.

4.45 p.m.

In conclusion, I would like to take up the remarks that were made by the hon. Member for East Aberdeen, who said that the Budget contained no inducements either to fishermen or to anybody else, and that no person associated with private business would be stimulated or stirred to do better by any of these tax remissions. I thought that was an extraordinary missing of the point. Are none of those people, not even the fishermen, appreciative of the cut in Income Tax from 10s. to 9s. in the £? Of course they are. Are none of them appreciative of the cut in the lower levels of taxable income? Would the business world have preferred me to have left the Excess Profits Tax where it was instead of reducing it to 60 percent.? Would the distinguished industrialists who have contributed to these Debates— [Hon. Members: "Order."] In what way am I out of Order?

Colonel Oliver Stanley: Surely the right hon. Gentleman must speak from a stationary position and not walk about.

Mr. Dalton: The thing is as easily said in one position as in another, and the thing 1 was saying was that these Debates have been adorned by a number of most valuable speeches from hon. Members on both sides who have had great industrial experience. Not one of them has said that he would prefer the Excess Profits Tax to stay at 100 per cent. On the contrary, all of them have expressed appreciation of the fact that it is coming down to 60 percent., and they have gone on to argue points of importance, but still of detail, about terminal losses, and so on, to which we shall come in due course. But how absurd it is to say that the Budget gives no stimulus to private enterprise. I am doing my best for private enterprise. I am still hoping for something from some bits of private enterprise. I am trying to meet the desires of the motor manufacturers, I am taking guidance from their communications. It does not advance the cause of this very modest and itself quite good Amendment —except that, as my hon. Friend the Member for South Nottingham (Mr. H. Smith) said, it is a bit untimely —to say that unless this Amendment is accepted, we are doing nothing in the Finance Bill for private enterprise. We are doing a great deal, and all the more enterprising people associated with private enterprise appreciate that that is so, and are going ahead on that basis. For the reasons I have stated, I cannot accept the Amendment now. It would disturb the balance of the Budget and it would mean that we would run a great inflationary risk. I cannot give what is asked for in the Amendment in addition to the reliefs I have given already, and I am not prepared to substitute what is asked for in the Amendment for any of the reliefs I have given. This Parliament will proceed on its course, and as I have said, it is by no means out of the question that something of this sort might be done before we next dissolve and go to the country. I ask the Committee to reject the Amendment.

Mr. Osbert Peake: The right hon. Gentleman the Chancellor of the Exchequer complained that some hon. Members on this side of the Committee


had made rather heavy weather of the Amendment, but since the right hon. Gentleman has taken some 50 minutes to reply, it is clear that all the heavy weather is not on this side. I am very sorry to keep some hon. Members who are eager to go in to the Division Lobby waiting a few minutes, but I promise I will make up with brevity for the rather lengthy exposition which we have had from the Chancellor.

Mr. Kirkwood: The right hon. Gentleman's generosity is beyond human understanding.

Mr. Peake: Hon. Members on this side are most anxious to make some progress with the Finance Bill,' which contains several very good features. I think 1 should begin by saying that the Chancellor has saved us a great deal of trouble by giving a frank and full statement of the effect of the failure to restore the earned income allowances. He admitted that, regarding the increased amounts of tax which fell to be paid as a result of the reduction of these allowances in 1940 not so much as Income Tax paid but as compulsory savings, 1,250,000,000 tax payers will be worse off as a result of this Budget. That saves a great deal of rather difficult and complicated argument upon particular cases and particular figures. I want to take up one point in the speech of the hon. Member for South Nottingham (Mr. N. Smith) and the speech of the Chancellor. Both of them seemed to suggest that this matter could be dealt with, if not now, then in the Budget of next April. I advise the Chancellor to consult his officials at the Board of Inland Revenue. I believe it to be a fact that it is quite impossible to alter the Income Tax law in an April Budget since P.A.Y.E. was introduced. The tax tables have to be printed and circulated to employers before the first pay week of the tax year which begins on 1st April. It is quite impossible, in a Budget introduced about 23rd April, to make an amendment of this character which would mean reprinting the whole of the tax tables. Therefore, let the Committee be quite clear that there is no question of putting this matter right in the April Budget. It will have to be done, if it is done at all, for the tax year 1947–48. I think that is generally agreed.

Mr. Callaghan: It would be quite possible to do what was done on this occa-

sion, that is to say, to give a different coupon value to the code numbers.

Mr. Peake: I am sure that the right hon. Gentleman the Chancellor of the Exchequer would have interrupted me if I was wrong on this matter. The hon. Member for South Cardiff (Mr. Callaghan) says that ex post facto you can alter the tax tables in some way. The P.A.Y.E. system is already sufficiently difficult, and if it is to be made quite incomprehensible by ex post facto alterations, the whole system will break down completely.
The issue before the Committee is, I think, a very simple one. I do not intend to argue the merits of a restoration of the earned income allowances to their former level. I shall not argue, as the right hon. Gentleman did, whether the electors would have preferred one form of benefit or another form of benefit from the present Budget. The simple issue is this. It was clearly understood, and in fact, a pledge was given at the time Sir Kingsley Wood introduced his second Budget in 1940, as Chancellor in a Government of which the right hon. Gentleman was a Member, that postwar credits would be granted in respect of the diminution of income suffered by people from whom the earned income allowances were being withdrawn. Therefore, quite regardless of any question of merit or expediency, it is wrong of the Chancellor, in the Clause that we are now discussing, to discontinue postwar credits as from April of next year and to do nothing whatever to restore the earned income allowances to their former level. The fact is that not only the people who are in receipt of earned incomes and who received these allowances, but also those who received the special allowance given to elderly people under the Finance Act, 1925, will be put in a position in which they can charge the Chancellor of the Exchequer and the Government with a clear breach of pledge. That is the 'situation which the Government have to face, and it is upon that issue that my hon. Friends and I will go into the Division Lobby.

Lieut.-Colonel Sir Walter Smiles: It seems to be a very unpopular thing today to defend those people with small incomes who have to work very hard for what they get. I was brought up in a Liberal household. I have not


heard the Liberals support this Amendment. I remember that a great many books on the subject of thrift, hard work and character were extremely popular 50 or 60 years ago. Young men were told that they must not depend upon the Government, or upon anybody else, but must depend upon their own hard work, intelligence and ability, and that when they went out into the world, at anything from 16 to 20 years of age, they must look after themselves.
The Chancellor spoke about the 1,250,000 people who are affected by this Amendment. Let us analyse who are those people. Just as the non-commissioned officers are supposed to be the backbone of the British Army, I contend that these 1,250,000 people who will suffer if the Chancellor does not accept this Amendment are probably the backbone of our country. They are the people, the young married couples with no children or with

Division No. 30.]
AYES.
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Aitken, Hon. M.
Fox, Sqn.-Ldr. Sir G.
Marlowe, A. A. H.


Allen, Lt.-Col. Sir W. (Armagh)
Fraser, Maj. H. C. P. (Stone)
Marples, Capt. A. E.


Amory, Lt.-Col. D. H.
Fraser, Lt.-Col. Sir I. (Lonsdale)
Marshall, Comdr. D. (Bodmin)


Astor, Hon. M.
Gage, Lt.-Col. C.
Maude, J. C.


Baldwin, A. E.
Galbraith, Comdr. T. D.
Mellor, Sir J.


Barlow, Sir J.
George, Maj. Rt.: Hn. G. Lloyd (P'br'ke)
Molson, A. H. E.


Baxter, A. B.
Glossop, C. W. H.
Moore, Lt.-Col. Sir T.


Beamish, Maj. T. V. H.
Glyn, Sir R.
Morris, Hopkin (Carmarthen)


Beattie, F. (Catheart)
Gomme-Duncan, Col. A. G.
Morrison, Maj. J. G. (Salisbury)


Bennett, Sir P.
Gridley, Sir A.
Morrison, Rt. Hon. W. S. (Cirencester)


Birch, Lt.-Col. Nigel
Grimston, R. V.
Mott-Radclyffe, Maj. C. E.


Boles, Lt.-Col. D. C. (Wells)
Harvey, Air-Cmdr. A. V.
Nevan-Spence, Major Sir B.


Boothby, R.
Haughton, Maj. S. G.
Nicholson, G.


Bossom, A. C.
Headlam, Lt.-Col. Rt. Hon. Sir C.
Noble, Comdr. A. H. P.


Bower, N.
Hinchingbrooke, Viscount
Nutting, Anthony


Boyd-Carpenter, Maj. J. A.
Hollis, Sqn.-Ldr. M. C.
Osborne, C.


Bracken, Rt. Hon. Brendan
Holmes, Sir J. Stanley
Peake, Rt. Hon. O.


Braithwaite, Lt.-Comdr. J. G.
Hope, Lt.-Col. Lord J.
Peto, Brig. C. H. M.


Bromley-Davenport, Lt.-Col. W.
Howard, Hon. A.
Pickthorn, K.


Buchan-Hepburn, P. G. T.
Hudson, Rt. Hon. R. S. (Southport)
Pitman, I. J.


Bullock, Capt. M.
Hulbert, Wing-Comdr. N. J.
Ponsonby, Col. C. E.


Butcher, H. W.
Hurd, A.
Poole, Col. O. B. S. (Oswestry)


Carson, E.
Hutchison, L.t-Cdr. Clark(Edin'gh,W.)
Prescott, Capt. W. R. S.


Challen, Flt.-Lieut. C.
Hutchison, Lt.-Col. J. R. (G'gow, C.)
Prica-White, Lt.-Col. D.


Channon, H.
Jarvis, Sir J.
Prior-Palmer, Brig. O.


Churchill, Rt. Hon. W. S.
Jeffreys, General Sir G.
Raikes, H. V.


Clarke, Col. R. S.
Joynson-Hicks, Lt.-Cmdr. Hon. L. W.
Ramsay, Maj. S.


Cole, T. L.
Keeling, E. H.
Reid, Rt. Hon. J. S. C. (Hillhead)


Cooper-Key, Maj. E. M.
Kingsmill, Lt.-Col. W. H.
Roberts, Maj. P. G. (Ecclesall)


Corbett, Lieut-Col. U (Ludlow)
Lambert, G.
Robinson, Wing-Comdr Roland


Crookshank, Capt. Rt. Hon. H. F. C.
Lancaster, Col. C. G.
Ropner, Col. L.


Crosthwaite.Eyre, Col. O. E.
Law, Rt. Hon. R. K.
Salter, Rt. Hon. Sir J. A.


Crowder, Capt. J. F. E.
Legge-Bourke, Maj. E. A. H.
Sanderson, Sir F.


Cuthbert, W. N.
Linstead, H. N.
Scott, Lord W.


Darling, Sir W. Y.
Lipson, D. L.
Shaphard, S. (Newark)


Davidson, Viscountess
Little, Dr. J.
Smiles, Lt.-Col. Sir W.


Digby, Maj. S. Wingfield
Lloyd, Maj. Guy (Renfrew, E.)
Smith, E. P. (Ashford)


Dodds-Parker, Col. A. D.
Lloyd, Brig. J. S. B. (Wirral)
Smithers, Sir W.


Donner, Sqp.-Ldr. P. W.
Lucas, Major Sir J.
Snadden, W. M.


Dower, Lt.-Col. A. V. G. (Penrith)
Lucas-Tooth, Sir H.
Spearman, A. C. M.


Drayson, Capt. G. B.
MacAndrew, Col. Sir C.
Spence, Maj. H. R.


Duthie, W. S.
McCallum, Maj. D.
Stanley, Col. Rt. Hon. O.


Eccles, D. M.
Mackeson, Lt.-Col. H. R.
Stewart, J. Henderson (Fife, E.)


Eden, Rt. Hon. A.
McKie, J. H. (Galloway)
Stoddart-Scott, Lt.-Col. M.


Erroll, Col. F. J.
Maclean, Brig. F. H. R. (Lancaster)
Stuart, Rt. Hon. J.


Fleming, Sqn.-Ldr. E. L.
MacLeod, Capt. J.
Studholme, H. G.


Fletcher, W. (Bury)
Macpherson, Maj. N. (Dumfries)
Sutcliffe, H.


Foster, J. G. (Northwich)
Manningham-Buller, R. E.
Taylor, C. S. (Eastbourne)

one child, who are just starting in life. The man will be working five and a half days a week and bringing home to his wife his wages. He and those like him will suffer if the Chancellor does not accept this Amendment. It is all very well for the Chancellor to tell us what he has done in the matter of Excess Profits Tax and in taking 1s. off the Income Tax, but those people are not so much concerned with those things; they are concerned with the amount of wages they will take home to their wives on Friday nights. If the Chancellor does not accept this Amendment, it will be a bad day for this country, and it will be a bad day for the country when it is generally accepted in the House of Commons that thrift and hard work are not going to be properly rewarded.

Question put, "That those words be there inserted."

The Committee divided: Ayes, 162; Nose, 284.

Teeling, Flt.-Lieut. W.
Vane, W. M. T.
White, Maj. J. B. (Canterbury)


Thomson, Sir D. (Aberdeen, S.)
Wakefield, Sir W W
Williams, C. (Torquay)


Thorneycroft, G. E. P.
Walker-Smith, Lt.-Col. D.
Williams, Lt.-Cdr. G. W. (T'nbr'ge)


Thornton-Kemsley, Col. C. N.
Ward, Hon. G. R.
Young, Maj. Sir A. S. L. (Partick)


Thorpe, Lt.-Col. R. A. F.
Watt, Sir G. S. Harvie



Touche, G. C.
Wheatley, Lt.-Col. M. J.
TELLERS FOR THE AYES:


Turton, R. H.
White, Sir D. (Fareham)
Mr. Drewe and Commander Agnew.




NOES.


Adams, W. T. (Hammersmith, South)
Edwards, A. (Middlesbrough, E.)
Maclean, N. (Govan)


Adamson, Mrs. J. L.
Edwards, Rt. Hon. Sir C. (Bedwellty)
McLeavy, F.


Allen, A. C. (Bosforth)
Edwards, John (Blackburn)
MacMillan, M. K.


Allen, Scholefield (Crewe)
Edwards, N. (Caerphilly)
Mainwaring, W. H.


Alpass, J. H.
Evans, E, (Lowestoft)
Mann, Mrs. J.


Anderson, A. (Motherwell)
Evans, S. N. (Wednesbury)
Manning, C. (Camberwell, N.)


Attewell, H. C.
Fairhurst, F.
Manning, Mrs. L. (Epping)


Awbery, S. S.
Farthing, W. J.
Marshall, F. (Brightside)


Ayles, W. H.
Foot, M. M.
Mathers, G.


Ayrton Gould, Mrs. B.
Forman, J. C.
Maxton, J.


Bacon, Miss A.
Freeman, Maj. J. (Watford)
Mayhew, Maj. C. P.


Baird, Capt. J.
Freeman, P. (Newport)
Medland, H. M.


Balfour, A.
Gaitskell, H. T. N.
Messer, F.


Barstow, P. G.
Gallacher, W.
Middleton, Mrs. L.


Bartlett, V.
Ganley, Mrs. C. S.
Mitchison, Maj. G. R.


Barton, C.
George, Lady M. Lloyd (Anglesey)
Monslow, W.


Battley, J. R.
Gibbins, J.
Montague, F.


Bechervaise, A. E.
Gibson, C. W.
Morgan, Dr. H. B.


Belcher, J. W.
Gilzean, A.
Morris, Lt.-Col. H. (Sheffield, C.)


Benson, G.
Glanville, J. E. (Consett)
Morris, P. (Swansea, W.)


Berry, H.
Gooch, E. G.
Mort, D. L.


Beswick, Flt-Lieut. F.
Goodrich, H. E.
Moyle, A.


Bevan, Rt. Hon. A. (Ebbw Vale)
Grenfell, D. R.
Murray, J. D.


Binns, J.
Grey, C. F.
Naylor, T. E.


Blackburn, A. R.
Grierson, E.
Neal, H. (Claycross)


Blenkinsop, Capt. A.
Griffiths, D. (Rother Valley)
Nichol, Mrs. M. E. (Bradford, N.)


Boardman, H.
Griffiths, Rt. Hon. J. (Llanelly)
Nicholls, H. R. (Stratford)


Bottomley, A. G.
Gunter, Capt. R. J.
Noel-Baker, Capt. F. E. (Brentford)


Bowden, Flg.-Offr. H. W.
Guy, W. H.
Noel-Buxton, Lady


Bowles, F. G. (Nuneaton)
Hail, Rt. Hon. G. H. (Aberdare)
O'Brien, T.


Braddock, Mrs. E. M. (L'p'l, Exch'ge)
Hall, W. G. (Colne Valley)
Oldfield, W. H.


Braddock, T. (Mitcham)
Hamilton, Lieut.-Col. R.
Orbach, M.


Brook, D. (Halifax)
Hannan, W. (Maryhill)
Paget, R. T. 


Brooks, T. J. (Rothwell)
Hardy, E. A.
Paling, Rt. Hon. Wilfred (Wentworth)


Brown, George (Belper)
Hastings, Dr. Somerville
Paling, Will T. (Dewsbury)


Brown, T. J. (Ince)
Haworth, J.
Palmer, A. M. F.


Bruce, Maj. D. W. T.
Henderson, J. (Ardwick)
Pargiter, G. A.


Burden, T. W.
Hewitson, Captain M.
Parkin, Flt.-Lieut. B. T.


Burke, W. A.
Hicks, G.
Paton, Mrs. F. (Rushcliffe)


Butler, H. W. (Hackney, S.)
Hobson, C. R.
Paton, J. (Norwich)


Byers, Lt.-Col. F.
Holman, P.
Peart, Capt. T. F.


Callaghan, James.
House, G
Perrins, W.


Champion, A. J.
Hoy, J.
Piratin, P.


Chater D.
Hudson, J. H. (Ealing, W.)
Platts-Mills, J. F. F.


Chetwynd, Capt. G. R.
Hughes, Hector (Aberdeen, N.)
Poole, Major C. C. (Lichfield


Clitherow, R.
Hynd, H. (Hackney, C.)
Porter, G. (Leeds)


Cluse, W. S.
Hynd, J. B. (Attercliffe)
Pritt, D. N.


Cobb, F. A.
Isaacs, Rt. Hon. G. A.
Proctor, W. T.


Cocks, F. S.
Janner, B.
Pryde, D. J.


Collick, P. Collindridge, F.
Jeger, Dr. S. W. (St. Pancras, S E.)
Pursey, Cmdr. H.


Collins, V. J.
John, W.
Ranger, J.


Colman, Miss G. M.
Jones, A. C. (Shipley)
Rankin, J.


Cook, T. F.
Jones, J. H. (Bolton)
Rees-Williams, Lt.-Col. D. R.


Cooper, Wing-Comdr. G.
Jones, Maj. P, Asterley (Hitchin)
Reid, T. (Swindon)


Corbet, Mrs. F. K. (Camb'well, N.W.)
Keenan, W.
Rhodes, H. 


Corlett, Dr. J.
Kenyon, C.
Richards, R.


Cove, W. G.
Key, C. W.
Ridealgh, Mrs. M.


Crossman, R. H. S.
King, E. M.
Roberts, Sqn.-Ldr. E. O. (Merioneth)


Daggar, G.
Kinghorn, Sqn,-Ldr. E.
Roberts, G. O. (Caernarvonshire)


Daines, P.
Kirby, B. V.
Robertson, J. J. (Berwick)


Dalton, Rt. Hon. H.
Kirkwood, D.
Rogers, G. H. R.


Davies, A. E. (Burslem)
Lang, G.
Royle, C.


Davies, Clement (Montgomery)
Lee, F. (Hulme)
Sargood, R.


Davies, Harold (Leek)
Lee, Miss J. (Cannock)
Scott-Elliot, W.


Davies, Haydn (St. Pancras, S.W.)
Leonard, W.
Sharp, Lt.-Col. G. M.


Deer, G
Levy, B. W.
Shawcross. Sir H. (St. Helens)


Diamond, J.
Lewis, A. W. J. (Upton)
Shurmer, P.


Dobbie, W.
Lewis, J. (Bolton)
Silverman, S. S. (Nelson)


Douglas, F. C. R.
Logan, D. G.
Simmons, C. J.


Driberg, T. E. N.
Longden, F.
Skeffington, A. M.


Dumpleton, C. W.
Lyne, A. W.
Skinnard, F. W.


Durbin, E. F. M.
McAdam, W.
Smith, Norman (Nottingham, S.)


Dye, S.
McAllister, G.
Smith, S. H. (Hull, S.W.)



McGhee, H. G.
Smith, T. (Normanton)


Edelman, M.
Mack, J. D.
Solley, L. J.







Sorensen, R. W.
Thorneycroft, H.
Whittaker, J. E.


Soskice, Maj. Sir F.
Thurtle, E.
Wigg, G. E. C.


Sparks, J. A.
Tiffany, S. 
Wilkins, W. A.


Stamford, W.
Tolley, L.
Willey, F. T. (Sunderland)


Steele, T.
Turner-Samuels, M.
Willey, O. G. (Cleveland)


Stephen, C.
Ungoed-Thomas, Maj. L.
Williams, D. J. (Neath)


Stewart, Capt. M. (Fulham)
Usborne, Henry
Williams, Rt. Hon. E. J. (Ogmore)


Stokes, R. R.
Vernon, Maj. W. F.
Williams, J. L. (Kelvingrove)


Strachey, J.
Viant, S. P.
Williams, Rt. Hon. T. (Don Valley)


Stross, Dr. B.
Wadsworlh, G.
Williamson, T.


Stubbs, A. E.
Walkden, E.
Willis, E.


Swingler, Capt. S.
Walker, G. H.
Wills, Mrs. E. A.


Symonds, Maj. A. L.
Wallace, G. D. (Chislehurst)
Wise, Major F. J.


Taylor, H. B. (Mansfield)
Wallace, H. W. (Wallhamstow, E.)
Woodburn, A.


Taylor, R. J. (Morpeth)
Watson, W. M.
Wyatt, Maj. W.


Taylor, Dr. S. (Barnet)
Webb, M. (Bradford, C.)
Young, Sir R. (Newton)


Thomas, Ivor (Keighley)
Weitzman, D.
Younger, Maj. Hon. K. G.


Thomas, I. O. (Wrekin)
Wells, P. L. (Faversbam)
Zilliacus, K.


Thomas, George (Cardiff)
Wells, Maj. W. T. (Walsall)



Thomson, Rt. Hon. G. R. (E'b'gh, E.)
Whiteley, Rt. Hon. W.
TELLERS FOR THE NOES:




Mr. Pearson nd Captain Snow.

Squadron-Leader Hollis: I beg to move, in page 13, line 48, at end, insert:
(3) Section twenty-one o the Finance Act, 1920 (which, as amended by subsequent enactments, provides for a deduction of fifty pounds in respect of each child), shall have effect, as respects the year 1946 –47 and subsequent years, as if the words' sixty pounds' were substituted for the words 'fifty pounds' in Subsections (1) and (3) thereof.
I commend this Amendment with some confidence to the kind attention of the Chancellor of the Exchequer and all hon. Members. The basic facts of the case are simple. The children's allowance of £60 was reduced to £50 at the outbreak of the war by the second Finance Act of 1939, and, therefore, it is logical that, with the conclusion of the war and the restoration of other allowances, we should bring forward the matter of the restoration of this allowance. I suggest that £50 in 1939 would by no means represent £50 today, with the increase of income and the increase in prices. On that ground, there is a strong case for the adjustment. Hon. Members who have followed the exchanges on the last Amendment will agree that the whole question of postwar credits is a case for readjustment. I will not take hon. Members again through the argument advanced by my hon. Friends, but, while appreciating the value of the argument of my hon. Friend the Member for Bath (Mr. Pitman), they will doubtless have noticed that the Chancellor's argument was that there were, indeed, some people with large families who were not doing well out of this Budget, but that that was not of great importance, because there were very few of them. If that be a valid argument against the last

Amendment, it is surely a far more valid argument in favour of this Amendment. Therefore with some confidence I hope the Chancellor will accept this Amendment.
5.15 p.m.
The true object of all sensible policy should be, in the first place, to do justice to those people who have large families and, in the second place, to do everything we possibly can to increase their number. Therefore, if the number of them be few, that is a national calamity which should be faced by remedial legislation. The only argument against the restoration of the children's allowances in the Income Tax is that children's allowances are to be paid in general. We welcome that, but really they do not meet this case at all because they are to be paid to quite a different class of people. The classes of people who will gain out of these children's allowances are either people who have very small incomes or people who have very large families. I make no complaint, that is quite right, but very early up the scale of ordinary Income Taxpayers, unless a person has an enormous family, he will not gain out of the children's allowances, because he will have to pay out with the right hand as much as or more than he receives back in his pocket in the allowances.
What is the class for which I am pleading in this Amendment? I make no bones about it; I am pleading for the people who will primarily benefit from this Amendment, people with £600 or £700 or £800 a year, a class of people who have rendered services to this country in every respect incomparably out of proportion to their number, and a class of people who deserve special attention 'because, unfor-


tunately, it is the class in which the birth-rate has fallen most steeply. In fact, I stand on this matter in precisely the same position as the hon. Member for Penryn and Falmouth (Mr. King) in a very able and courageous speech which he delivered from the other side of the House in the education Debate some three weeks ago. I stand here claiming that it will be a national calamity to every class of the community if that class should be driven out of existence. In making that claim I have very considerable support behind me. Only the other day I was reading a passage on what would happen if that class were driven out of existence. I read:
Nor is it certain that we shall replace him by a more admirable type.…The leader of the future seems not unlikely to be the remorseless one-idea'd man, who governs us by hewing his way to his goal. He has no time for the open mind. He takes clemency for weakness and difference of opinion for crime. He has a horror of a various civilization and he means by freedom only a stronger kind of chain. Where we would be peaceful, he calls us to the affirmation of power. For the music of idle dreams he offers us the relentless hum of giant machines. The majesty of the forest is, for him, the volume of a timber supply, the rush of waters in the river, the source of electric power. The gentleman scourged us with whips. We must beware lest our new masters drive us to our toil for sport.
Those wise words were from no less a man than Professor Laski. This class, as I say, has rendered service to the community incomparably out of proportion to their numbers —schoolmasters' children, doctors' children, clergymen's children. Has not the Chancellor a kind place in his heart for clergymen's children? What would have been the position of the Chancellor if such a Budget as this had existed in the time of his father? The position would be that he would never have been born —nor would I have been born. We could have paired in non-existence —but how boring that would be. That is the first basis of my case. I plead frankly a compassionate case for a class which both under this Budget, and indeed under the development of events over the last generation, has been more cruelly pressed upon than any class in the community and, at the same time, has continued to render at least as valuable services as any class of the community.
But it is not purely a compassionate case, nor indeed, a purely financial case

that I am pleading in pressing this Amendment. We cannot consider parents as a class to be treated with compassion, and thrown sops where it is possible, in the way that we might throw sops to motor car users or cinema operators or, indeed, even to the Chancellor's publican friends I wish to speak without disrespect of the Chancellor's publican friends because, if only from internal evidence, 1 have reason to believe he is a constituent of mine. I have to spare him as a constituent, but I have by no means given up hope of the publicans. What happens, in my experience, is that publicans keep their mouths shut but, on the day, they give their support to a different cause from that of their most generous customer. Therefore it is not merely as a compassionate case that I plead for this Amendment.
There is a very much deeper ground on which I plead this case. Any question, such as I am raising at the moment, which touches the birth rate and the population question, touches the deepest and most important and most vital of all the problems of our national life, a problem which we must solve, for, if we fail to solve it, we shall smash into ruins all those dreams of a better England —whether they be held on this side of the House or on that side. Our most complacent and most optimistic ancestors thought there was a steady and easy progress going on, and that things got better and better, and we could look forward to a more rosy future. In these days we have discovered that the true lesson of history is a much more terrible and terrifying one. The great lesson of the past has shown us again and again that a nation attains to a condition of high living and to a certain luxury, and then the birth rate falls and the countries of lower standards come in and exclude it. They, in their turn, become prosperous, become infecund, and are conquered.
That has been the lesson of history again and again repeated, and every wise and patriotic person in this country is determined that that shall not be the fate of the English-speaking people in this twentieth century. But, if he is as wise as he is patriotic, he is very well aware that if we avoid that disaster we shall be the first civilisation in human history that has avoided that disaster. Therefore, of all problems, the most important is the problem of the birth rate. It is a very


deep and a very mysterious problem. I am far from pretending that it is a mere matter of finance. I am far from pretending that you can raise the birth rate merely by lowering taxation, and that you are likely to raise it by such a comparatively modest proposal as that which I am arguing at the moment, but there is a financial effect in this Amendment and, almost more important, there is a psychological effect. There is no chance of a country solving this problem unless this Government and every other Government, in every piece of legislation that is introduced which has a bearing on that problem, show that they put it at the forefront, show that they consider the problem of increasing parentage the most important and the most pressing of all the problems of the day. Therefore it is both as the compassionate case of this particularly deserving class that I urge this Amendment and, above all, as a psychological rallying cry to the nation that the Chancellor should show that, when allowances are to be restored, the allowance to parents should be the first, and not the last of the allowances to be restored.
May I put the case in a slightly more financial fashion? On this, as on many things, it is rather difficult to come to an exact estimate of what would be the cost of this concession for which we are asking. There are in what I call round numbers —which it is now the fashion to call global numbers —some 10,000,000 children in this country. The concession we are asking is a raising of the allowance by £10. Income Tax is to be at 9s. in the £ that is to say, £4 10s. out of £10, and on that basis the maximum cost of £4 10s. if it were to come from the whole 10,000,000 would be £45,000,000. Of course the cost would be nothing like that, since a very large proportion of children are children of parents who are not Income Taxpayers at all, or who are paying very little Income Tax. I am told, though I do not hold any authority for the figures, and shall be glad to be corrected, that the cost would, be somewhere about £15000,000.
Let me put the point like this—which is the way I really approach it: Modern economists have generally reached the conclusion that it. is a mistake to think it a financial necessity to balance the Budget in each particular year and, as we know,

the Chancellor has adopted that conclusion of theirs and has received general support in adopting it from every side of the Committee. The Chancellor has been asked — and has not yet been in a position to give a definite answer as far as I know —over what period of years does he consider that the Budget should be balanced? I do not want to press him on that point, nor do I suggest that the Budget necessarily should only be balanced over a period of a lifetime, but I suggest that in any financial consideration the period that should be in everybody's mind is a period of a lifetime. If we look at it in the light of a particular year, children are, of course, an expense — £15,000,000 or whatever it may be — and, for the moment, a dead loss. But once it be granted that the population of a country is in danger of falling below an optimum figure —and as unfortunately there is no doubt in this country that we are in that danger —then, in the long run, and over a lifetime, it is not a detraction from the wealth of a country that there should be more children, but an addition to the wealth of the country that there should be more children. Then £15,000,000 or whatever it may be, should be looked upon not as an expenditure but as an investment. The Chancellor is to give us a National Investment Board. I suggest to him, with all confidence, that there could be no more important and no more worthy object in which to make its first investment than in the children of this country.

5.30 p.m.

Mr. Lipson: I am very glad to support the Amendment moved by my hon. and gallant Friend the Member for Devizes (Squadron - Leader Hollis) so eloquently, and in a speech of great wit and humour. He has shown, and I agree with him, that this Amendment goes not only to the very roots of our national greatness, but also of our national survival. In asking the Chancellor to accept it, I join with my hon. and gallant Friend in, appealing not only to his sympathy and his kind heart, but also to his statesmanship and his vision of the future. Naturally, when the Chancellor of the Exchequer is asked to make any remission of his Budget proposals, there are three questions that he may very properly ask himself. First, is this concession in itself a good and a desirable one; secondly, how much will it cost; and


thirdly, can I afford it? With regard to the first question, I would reply by asking what class of the community is more worthy of help and encouragement in a Budget than the parents of children? The Chancellor has a very real interest in this matter. These children will be the taxpayers of the future, and, naturally, the Chancellor is concerned with making conditions easy not only for himself, but for those who will succeed him in his high office. Supposing the parents of this country were to decide to go on strike and have no more children, what would happen to future Chancellors when they had to produce their Budgets? Therefore, I appeal to my right hon. Friend to consider the very difficult financial position in which many parents find themselves these days.
There is no class of the community which pays more, comparatively, in indirect taxation than the married man with children. If he pays more in indirect taxation, as he undoubtedly does, he has a very strong claim for some remission in direct taxation at the earliest possible moment. Who are these parents for whom this concession is demanded? They are the parents who have children of school and university age. Children's allowances are only paid as long as the children arc in receipt of some kind of education. These parents are the men who came under the National Service Acts during the war, for the most part, the men who have helped to make victory possible and, therefore, we ought to want to make conditions for them in the future as easy as possible. The overwhelming majority of these men, undoubtedly, have had their careers interrupted by the war and, therefore, the Chancellor ought to be sympathetic and to restore to them the allowance for their children which existed before the war.
What is it going to cost the Chancellor to make this concession? It is very difficult for anybody who is not associated with the Treasury to be able to make an exact calculation. My hon. and gallant Friend the Member for Devizes estimated the cost of the concession at £15,000,000. If he is wrong, perhaps the Chancellor will tell us exactly what the amount is. The Chancellor ought not to look at this matter purely from the point of view of the actual amount of money involved. There is a much bigger issue behind it. I do not think he need fear

that, by making this concession, he will be adding to any danger of inflation or that it will make is impossible for him to balance his Budget. Fortunately for him, the rate of expenditure. which, apparently, he is prepared to accept for the months that lie ahead has left him a very wide margin, so that he can easily find —I hope with reasonable economy and without sacrificing any of the interests of the nation —the savings which would enable him to meet a remission of this amount.
To come back to the three questions: Is the concession in itself a good and a desirable one? How much will it cost? and Can I afford it?; I think the answers to all of them are such that the Chancellor might very easily make this concession. Though I sit on this side of the House, I speak as one who does not count himself in opposition to the Government but rather regards himself as a benevolent neutral, with emphasis on the word "benevolent," and therefore, if I make an appeal to the right hon. Gentleman, he will understand that it is not with any desire to add to his difficulties or with any desire to show opposition to the Government, but because I believe that such a concession would not only do him credit but would be of benefit to the nation.

Mr. N. Smith: I wonder if it is anything more than a coincidence that both these Amendments this afternoon should have been moved from the benches opposite by hon. Members who in the past have had the courage and intelligence to identify themselves with opinions which must be as unacceptable to their own party as many of my opinions are to my party. I congratulate the hon. and gallant Gentleman the Member for Devizes (Squadron-Leader Hollis) on the really admirable speech with which he introduced his case and in which he made a very good case, of most of which' I entirely approve.
I would go further. I would like to abolish taxation altogether, but to discuss that would be out of Order and you, Mr. Deputy-Chairman, would not allow me to advocate it. The hon. and gallant Member for Devizes told us many things. He told us about the appalling boredom of non-existence, to which I can personally testify, because I cannot remember anything before about 1890. He told us also that publicans keep their mouths shut, which struck me as being an extraordin-


ary thing, seeing that, as I can testify personally, publicans get their living because we, their customers, do not keep our mouths shut. He also told us that, if the Amendment were carried, it would benefit a class of society whose incomes are of the order of £700 or £800 a year. I do not sneer at that class of society. I agree with him that it is a worthy class of society, but I would point out, with great respect, that the Chancellor has really given that class of society a handsome '' hand-out '' in the Budget. He has handed them a reduction of is., in the standard rate, plus the benefit represented by improving the allowances. The hon. and benevolent Member for Cheltenham (Mr. Lipson), in a very charming speech, wanted the Committee to put three tests to the Amendment. I submit, with very great respect, that he did not put the fourth, the question whether the Amendment is timely, which I suggest it is not: for the reason that the shops are not yet full of goods. The hon. and gallant Member for Devizes said that we were very near the time when family allowances are to be paid out. I suggest that the Amendment should be introduced at a little later date, by which time the shops will be full of goods. When they are full of goods, I am in favour of handing out as much purchasing power as will enable all the people who want goods to get goods, and I am sure that when that time comes the hon. and gallant Member for Devizes and I will be found advocating the same objective. But this is not the time, and I hope that my right hon. Friend the Chancellor will resist the Amendment.

Mr. Dalton: Perhaps it will be convenient for the Committee if I say at this stage that I am most sympathetic to this proposal on the broad form of taking care both of the children of the future and of the parents of those children who should be given such parental advantages as could be woven into our fiscal arrangement. But I cannot accept the Amendment today. I have already spoken on the broad subject of the total relief it would be wise to give if we are to avoid inflation. It would indeed be a poor service to the children and to those families if we were to allow inflation to set in.
I have already given the Committee my view, that we have gone to the limit for the moment in the body of Income Tax

reliefs which are already included in the Bill. The hon. and gallant Member who represents me in this House made a very attractive speech and I disagree with nothing that he said, except on the single point of whether this is the moment to do what he proposes. In my view, it is not yet the moment. Obviously, it is one of the things one would like to do as soon as possible. It would cost £17,500,000, and that would take me beyond my safety limit, as I explained to the Committee, and moreover, the allowance at £50 is not included in the Post-War Credits discussion we have just had, because it was set at £50 in 1940. This is no argument of any new principle; it stands on another footing. It was reduced to £50 in 1940. Moreover, as my hon. Friend the Member for South Nottingham (Mr. N. Smith) has pointed out, the family allowances scheme, which is, I am very glad to say, based on the Bill which was passed in the last Parliament, is coming into effect, as far as payments out are concerned, in August. I am very proud to think, if I still succeed in holding my office until then, it will fall to me as Chancellor to provide for the finance of that family allowances scheme. I attach very great importance indeed to it and it indicates the road along which it is most undeniable we must proceed to travel, but at the moment I cannot accept the Amendment, though I am very anxious to do in effect what has been suggested by the hon. and gallant Gentleman as time and circumstances permit.

Lieut.-Colonel Sir William Allen: It is not often that representatives from Northern Ireland have an opportunity of taking part in a Debate in this House, but we do have an opportunity occasionally when the Finance Bill is introduced. I would remind the Committee that we pay the same taxes in Northern Ireland as are paid over here. I saw from a report of the speech of our Chancellor of the Exchequer of Northern Ireland the other day that we are contributing £35,000,000 to the Exchequer for this year, and we have been doing that for some years. I congratulate the hon. and gallant Gentleman the Member for Devizes (Squadron-Leader Hollis) upon his excellent and very well reasoned speech, and I am sorry that the Chancellor cannot see his way to accept the Amendment.
I remember that when the Irish Question was being debated my predecessor in the representation of Armagh while speaking in the House he was asked, "What are your arguments against Home Rule?" He turned to the Irish Nationalists who were sitting on this side of the House, and said, "I have 83 arguments against it." I have 23 arguments in favour of this Amendment but I am not going to go through 23 different headings in Debate. I want to tell the Chancellor of an individual in one of the constituencies in Northern Ireland who deserves well of the Chancellor and of this country. He is a man who has been married three times, and is the father of 23 children. I do not know if that will really be an argument. I may have been rash in mentioning it. The Chancellor might think that, if there were many families of that size, he would be more inclined to reduce the allowance from £50 to £40 than to increase it from £50 to £60. But surely such a man deserves well of his country. We have an opportunity now of doing something for the family of that kind of man. I appreciate the argument of the Chancellor that this is not quite the time to do anything, but let us see what can be done in the near future.
I feel that it is my duty to try to do what can be done for these men and their wives and children, who deserve so well of their country, and who have brought into the world those who will be responsible for future Governments. The children of today will be the men and women of tomorrow. I think that the Chancellor of the Exchequer and those responsible for the distribution of funds ought to consider this matter very seriously. I know the big heartedness of the Chancellor of the Exchequer, and I know what he has been doing, or trying to do, under very difficult circumstances; but here is a case, I think, which requires special consideration and attention.

545 p.m.

Mr. Gallacher: I was concerned about the hon. and gallant Member who moved this Amendment posing as one who is interested in the population, and the future of the country. I am very much interested in the population, and in this financial statement. I know that this country and this civilisation will not go the way of past civilisations. In past civilisations, the ruling

class became voluptuous, immoral, and decadent, and there was no air for the enslaved masses of the people. The masses of the people of this country are finding a way out, and will build up the population and save the country. That is why we have a Labour Chancellor of the Exchequer, and that is why the hon. and gallant Member is sitting among the decadents.

Captain Crookshank: We have had an interesting little discussion and perhaps the Committee will want to pass on to the next problem that a waits us. We listened with great interest to the sympathetic words of the Chancellor of the Exchequer although I fear that in the end he will come down on the side of not doing anything. That is often the hard lot of Chancellors of the Exchequer, but it seems to us that this is one of the allowances that should have priority treatment. The right hon. Gentleman reminded us that a cut was made at the beginning of the war, and we feel that such cuts should have a high place in the list of those to be restored. The status quo before the war is a sort of guiding line from which to start the allocation of allowances. The fact that this relief is estimated to cost only £17,000,000 does not seem to us, on these Benches, to be an adequate reason for not restoring it. I hope that we speak with a sense of responsibility about the general financial outlook, and that on some future occasion, we may have the benefit of further speeches from the hon. Member for South Nottingham (Mr. N. Smith), who told us that his objective was to abolish all taxes. That is a great idea; but, if it is adopted, I wonder how the State is going to be run?
In the meanwhile, without wishing the right hon. Gentleman to go as far as that on this occasion, it seems to us that the case for this relief was cogently argued, by the hon. Members behind me and the benevolent neutral below the Gangway, and received affirmation from all. The right hon. Gentleman made the point, which we have in mind, as he has, of the risk of reliefs having an inflationary tendency, and the hon. Member for South Nottingham said that we ought to wait until the shops are full. With those two propositions one has a lot of sympathy — although, if we are to wait until all the shops are full, under the present Administration, and the rate which they are turn-


ing over production, we may have to wait a terribly long time. On the other hand, the arrangements which we are discussing in this Bill do not begin to take effect until April; and is it too much to hope that there may be such improvement by April that the difference of £17,000,000, one way or the other will not be really inflationary.
I dare say that the right hon. Gentleman feels quite firm about this and will not look at it again; but there is the Report stage to come, and he might weigh up the arguments meantime and find out the prospects of beginning to fill the shops. It might be possible for him to make some concessions then. From the way he put the case I do not, how-

ever, think that is very likely to happen, but we feel this allowance ought to be restored and, we propose to test the feeling of the Committee on it.

Mr. Vernon Bartlett: I support the Amendment, and I am sorry that the right hon. Gentleman has not been able to give way. The main argument, I think, was that we should be getting family allowances next year. I hope that we shall. I would remind him, however, that when we get family allowances they will not apply to the first child.

Question put, "That those words be there inserted."

The Committee divided: Ayes, 161; Noes, 230.

NOES.


Adams, W. T. (Hammersmith, South)
Granville, E. (Eye)
Pritt, D. N.


Allen, A. C. (Bosworth)
Grenfell, D. R.
Proctor, W. T.


Allen, Scholefield (Crewe)
Grierson, E.
Pryde, D. J.


Anderson, A. (Motherwell)
Guest, Dr. L. Haden
Ranger, J.


Anderson, F. (Whitshaven)
Gunter, Capt. R. J.
Rankin, J.


Attewell, H. C.
Guy, W. H.
Reeves, J.


Awbery, S. S.
Hall, W. G. (Colne Valley)
Rhodes, H.


Ayrton Gould, Mrs. B.
Hamilton, Lieut.-Col. R.
Richards, R.


Baird, Capt. J.
Hannan, W. (Maryhill)
Ridealgh, Mrs. M.


Barstow, P. G.
Haworth, J.
Robens, A.


Barton, C.
Hewitson, Captain M.
Roberts, G. O. (Caernarvonshire)


Battley, J. R.
Hicks, G.
Robertson, J. J. (Berwick)


Bechervaise, A. E.
Hobson, C. R.
Royle, C.


Belcher, J. W
House, G.
Sargood, R.


Benson, G.
Hoy, J.
Scott-Elliot, W.


Barry, H.
Hughes, Hector (Aberdeen, N.)
Sharp, Lt.-Col. G. M.


Bevan, Rt. Hon. A. (Ebbw Vale)
Hynd, J. B. (Attercliffe)
Shawcross, Sir H. (St. Helens)


Blackburn, A. R.
Jeger, Dr. S. W. (St. Pancras, S.E.)
Shurmer, P.


Blenkjnsop, Capt. A.
Jones, J. H. (Bolton)
Silverman, S. S. (Nelson)


Bottomley, A. G.
Jones, Maj. P. Asterley (Hilchin)
Simmons, C. J.


Bowden, Flg.-Offr. H. W.
Keenan, W.
Skeffington, A. M.


Bowles, F. G. (Nuneaton)
Kenyon, C.
Skinnard, F. W.


Braddock, Mrs. E. M. (L'p'l, Exch'ge)
Key, C. W.
Smith, Ellis (Stoke)


Braddock, T. (Mitcham)
Kirby, B. V.
Smith, Norman (Nottingham, S.)


Brooks, T. J. (Rothwell)
Kirkwood, D.
Smith, S. H. (Hull, S.W.)


Brown, George (Belper)
Lang, G.
Smith, T. (Normanton)


Burden, T. W.
Lee, Miss J. (Cannock)
Solley, L. J.


Butler, H. W. (Hackney, S.)
Levy, B. W.
Sorensen, R. W.


Byers, Lt.-Col. F.
Lewis, A. W. J. (Upton)
Soskice, Maj. Sir F.


Callaghan, James.
Logan, D. G.
Sparks, J. A.


Champion, A. J.
Longden, F.
Stamford, W.


Chater, D.
Lyne, A. W.
Steele, T.


Cheiwynd, Capt. G. R.
McAdam, W.
Stephen, C.


Clitherow, R.
McAllister, G.
Stokes, R. R.


Cluse, W. S.
McGhee, H. G.
Strachey, J.


Cobb, F. A.
McGovern, J.
Stubbs, A. E.


Collick, P.
Mack, J. D.
Symonds, Maj. A. L.


Collindridge, F.
McKay, J. (Wallsend)
Taylor, R. J. (Morpeth)


Collins, V. J.
Maclean, N. (Govan)
Taylor, Dr. S. (Barnet)


Colman, Miss G. M.
McLeavy, F.
Thomas, John R. (Dover)


Cook, T. F.
MacMillan, M. K.
Thomson, Rt. Hon. G. R. (E'b'gh, E.)


Corbet, Mrs. F. K. (Camb'well, N.W.)
Mainwaring, W. H.
Thorneycroft, H.


Corvedalc, Viscount
Mann, Mrs. J.
Thurtle, E.


Cove, W. G.
Manning, C. (Camberwell, N.)
Tiffany, S.


Daggar, G.
Manning, Mrs. L. (Epping)
Tolley, L.


Dairies, P.
Marshall, F. (Brightside)
Turner-Samuels, M.


Dalton, Rt. Hon. H.
Maxton, J.
Ungoed-Thomas, Maj. L.


Davies, Edward (Burslem)
Mayhew, Maj. C. P.
Vernon, Maj. W. F.


Davies, Clement (Montgomery)
Mikardo, Ian
Wadsworth, G.


Davies, Harold (Leek)
Mitchison, Maj. G. R.
Walkden, E.


Davies. Haydn (St. Pancras, S.W.)
Monslow, W.
Wallace, G. D. (Chislehurst)


Deer, G.
Montague, F.
Wallace, H. W. (Walthamstow, E.)


Diamond, J.
Morgan, Dr. H. B.
Watson, W. M.


Dobbie, W.
Morris, P. (Swansea, W.)
Webb, M. (Bradford, C.)


Douglas, F. C. R.
Morris, Hopkin (Carmarthen)
Weitzman, D.


Driberg, T. E. N.
Moyle, A.
Wells, P. L. (Faversham)


Dumpleton, C. W.
Nally, W.
Wells, Maj. W. T. (Walsall)


Durbin, E. F. M.
Naylor, T. E.
White, H, (Derbyshire, N.E.)


Dye, S.
Neal, H. (Claycross)
Whiteley, Rt. Hon. W.


Edwards, Rt. Hon. Sir C. (Bedwellty)
Nichol, Mrs. M. E. (Bradford, N.)
Whittaker, J. E.


Edwards, John (Blackburn).
Nicholls, H. R. (Stratford)
Wilcock, Group-Capt. C. A. B.


Edwards, N. (Caerphilly)
Noel-Baker, Capt. F. E. (Brentford)
Wilkins, W. A.


Evans, S. N. (Wadnelbury)
Noel-Buxton, Lady
Willey, O. G. (Cleveland)


Fairhurst, F.
O'Brien, T.
Williams, D. J. (Neath)


Farthing, W. J.
Oldfield, W. H.
Williams, J. L. (Kelvingrove)


Foot, In. M.
Orbach, M.
Williams, Rt. Hon. T. (Don Valley)


Forman, J. C.
Paget, R. T.
Willis, E.


Foster, W. (Wigan)
Paling, Will T. (Dewsbury)
Wills, Mrs. E. A.


Fraser, T. (Hamilton)
Palmer, A. M. F.
Wise, Major F. J.


Freeman, P. (Newport)
Pargiter, G. A.
Wyalt, Maj. W.


Gaitskell, H. T N.
Parkin, Fit.-Lieut. B. T.
Yates, V. F.


Gallacher, W.
Paton, Mrs. F. (Rushcliffe)
Young, Sir R. (Newton)


George, Lady M. Lloyd (Anglesey)
Paton, J. (Norwich)
Younger, Maj. Hon. K. G.


Gibbins, J.
Pearson, A.
Zilliacus, K.


Gibson, C. W.
Peart, Capt. T. F.



Gilzean, A.
Perrins, W.
TELLERS FOR THE NOES:


Glanville, J. E. (Consett)
Piratin, P.
Mr. J. Henderson and Captain Snow.



Poole, Major C. C. (Liehfield)

Colonel Oliver Stanley: I beg to move, in page 14, line 16, leave out Subsection (4).
The effect of this Amendment would be to restore in those cases in which they were previously enjoyed — if for the


moment I may use that term —postwar credits. This is an alternative way of dealing with the situation which has already been discussed on a previous Amendment. I do not want again to cover the ground which has been so fully and ably traversed in the Debate on the Amendment to restore the earned income allowance. Despite the appeals of hon. Members on this side, that Amendment was rejected by the Chancellor. The only other way in which it would be possible to maintain, under the new provisions of this Budget, the relative position as between the unearned and earned income of the Income Tax payer which existed last year under the new provisions of this Budget, would be for the Chancellor now to accept this Amendment. A great deal of his argument in opposition to the previous Amendment was that if he were to accept it, if he were to disburse the £105,000,000 which the acceptance of that Amendment would entail, there would be great risk of inflation. He told us that he regarded a reduction in taxation in the neighbourhood of £300,000,000 as the maximum which would be safe without incurring that risk. None of us here have any means of checking the accuracy of that figure, or of seeing whether we agree with that statement. For reasons which we well understand we are provided with no estimate of expenditure or revenue for next year. We cannot tell what changes would or would not unbalance the Budget. We can do no more than accept the ipse dixit of the Chancellor. All of us, therefore, are naturally impressed by that particular argument.
No one in any part of the Committee would be so frivolous or so irresponsible as willingly to run the risk of what might well be an ultimate tragedy for this country, and we only hope that, if and when the Chancellor uses the same argument against expenditure which might be dear to the hearts of some hon. Members opposite, they will be as impressed with the argument then, as they are now, and as ready to vote for the argument then as they have been today. The great merit of this Amendment and the solution it offers is that the question of inflation cannot be introduced into the Debate. We are not now proposing that the injustice, as we believe, to the earned income payers of Income Tax should be remedied by im-

mediate cash payments, or rather by immediate remissions of taxation. We are suggesting that it should be remedied as it was last year and the year before, by the issue of postwar credits, which would be repayable as and when the Chancellor of the day believed that they might be paid without the danger of inflation being incurred.
Therefore, I hope that the Chancellor will find himself much more ready to accept this Amendment than he was to accept the previous one. In any case if he intends to refuse it he will have to think out some new argument. One of his arguments, judging at any rate from a previous speech he has made, may be that even if he were to give this relief, no one would say "Thank you" to him for it. I do not believe that is the case. I do not believe that the people of this country are so financially irresponsible that they attach no importance to having in the background a promise to pay by His Majesty's Government, which even if it cannot be encashed at the moment does represent a door open to them in the future. The right hon. Gentleman advanced the extraordinary theory that one does not enjoy money until one spends it. He might just as well say that he does not enjoy office until he leaves it.

Mr. Attewell: That is long deferred.

Colonel Stanley: Some of us might wish he should have the chance as soon as possible. I cannot understand an argument of that kind being seriously advanced. It might just as well be said that if a man had a net income of £300 a year and of that saved voluntarily —whereas these postwar credits are compulsory savings —£30, his real income was only £270 a year, and that if next year his salary were cut down to £270 he would be no worse off than before because he was still able to enjoy, that is to spend, exactly the same amount he spent the year before. That seems to me an argument which would be a foolish argument in anybody's mouth, but which, in the mouth of the Chancellor who wishes to appeal for savings, is dangerous in the extreme. The Chancellor has got himself into a difficulty. The previous Amendment, we realise, might have been dangerous on the inflationary ground. By this Amendment we are giving him the opportunity of redeeming the pledge made by


the Chancellor of the Exchequer of a Government of which the present Chancellor was a member, and secondly of remedying an injustice which is undoubtedly imposed upon one class, and one class only, in this Budget, and of being able to do that without any possibility of incurring the risk of inflation which all of us will assist him in avoiding.

Sir Hugh Lucas-Tooth: On a point of Order. There are other Amendments, including one in my name on page 237 of the Amendment paper, which I understand are not to be called. Should we foe in Order in discussing those Amendments together with this one?

The Temporary Chairman (Colonel Sir Charles MacAndrew): The next Amendment to that now being discussed has not been selected, nor have the two new Clauses in the name of the hon. and gallant Member for South Hendon (Sir H. Lucas-Tooth).

Sir H. Lucas-Tooth: Do I understand that I shall be in Order in raising the matter on this Amendment?

The Temporary Chairman: Yes, they are covered by this discussion.

Mr. N. Smith: The right hon. Gentleman the Member for West Bristol (Colonel Stanley) moved this Amendment with the persuasiveness that is characteristic of him, and I have no doubt that the Committee was very much impressed by his argument. I entirely agree with him that there is no truth whatever in the allegation that people do not enjoy money which is in their possession only prospectively. When postwar credits began, I was working in a big newspaper office in London, and it was quite a common thing at the time to see members of the staff, particularly members of the mechanical staff, solemnly adding up the sums of money to which they would subsequently be entitled, and even planning what they would do with the money when they got it. I have even known people who derived immense pleasure from thinking out what they would do when they got their prospective winnings from the Irish "Sweep."
That is all very well, but for the moment and in the immediate future we have to think of other things. I am opposed to this Amendment, and I hope the Chancellor will oppose it, because I

am pretty certain that the Labour Government will last a good many years, and I do not want to pile up future difficulties for it. If effect were given to this Amendment the result would be to increase the dead weight of debt, not by much compared with the total, but it is a process which has been going on for years.' I cannot understand the almost unvarying levity with which hon. and right hon. Gentleman, not only in the party opposite, contemplate the steady augmentation of the deadweight of the National Debt. It means that in the near future one of two things will happen, if these postwar credits are continued. There is not a Member who would dissent from the view that the eventual and not unduly delayed restoration of these postwar credits is an absolute pledge. One day they have to be made good, people must have their money, and we are all in favour of that, and it should go forth from this Committee that when the money is paid it must have real value.
There are only two ways in which it can be repaid, and I am assuming it is going to be repaid during the lifetime of the present Parliament so that those printers and others may have the satisfaction of having their credits transmuted into reality. You can only do it in one of two ways, either by adding to the Debt, which is going to remain a burden on posterity —and we have enough of that already —or having recourse to deflationary measures. I personally shrink with horror from paying postwar credits out of current taxation, therefore I hope the Committee will not accept this Amendment because it is piling up trouble for the immediate future and I do not want that because I am convinced that for the next "10, 15 or 20 years there will be a Labour Government.

6.15 p.m.

Mr. Dalton: It may be convenient if I indicate the Government's view. We cannot accept the Amendment which proposes to add £105,000,000 to the National Debt. It would only make up the figure we have been discussing on an earlier Amendment to the taxpayers who can be alleged —although I do not admit the argument —to be worse off, but also to those 11,750,000 taxpayers who even on the basis of arguments from the other side of the Committee will be better off as a result of my proposals.

Mr. J. Pitman: I would call the attention of the Committee to the provisions of the following Amendment on the Paper, one which has not been selected, because it does not fall within the limitation which the Chancellor has just made. In other words, it would be a very small addition indeed to the National Debt in terms of postwar credits. As between the two Amendments put down, I was in this dilemma that one Amendment is for restoring of the postwar credits in full, which would at any rate have made this document correct —this particular White Paper which has misled so many people. The second Amendment, the one which merely restored the 10s. 10d. to the small working man drawing £3 18s. 4d., would make the Chancellor's statement on the wireless correct. I was hoping to have both, or at least one, accepted by the Chancellor.

Mr. Paget: The manner in which this Amendment was moved seems to suggest that hon. Members have forgotten what postwar credits were about. Postwar credits arose from the scheme of Lord Keynes and the basis of that scheme was that when, after the war, you got a period of deflation, it would be convenient to have some "dope" to put in and thereby create the new spending power which would then be required. It seemed natural to the people then in control that if there were more money to be spent, it should be spent by people on the highest income levels.

Colonel Stanley: The then Government included the right hon. Gentleman the Chancellor of the Exchequer.

Mr. Paget: That is as it may be, but it was a predominantly Conservative Government. It was a Government with a Conservative Chancellor and was putting forward a predominantly Conservative policy and, of course, they said "When there is additional money to be spent the rich shall spend it and not the poor." Now you have a Labour Government and when the community requires more spending power, we on this side of the Committee believe that that spending power will be more effective, and more useful in the hands of the poor and that the effect which was contemplated by these postwar credits, can be achieved by giving more money to the

poor instead of more money to the rich. In my submission that is the simple answer to this Amendment.

Lt.-Commander Gurney Braithwaite: The Chancellor of the Exchequer, in perfectly firm language, has declared his resistance to this Amendment but I cannot think he has been altogether fortunate in the support he has received from hon. Members behind him or in the reasons they have adduced. If I may first refer to the brief and extremely vulnerable intervention of the hon. Member for Northampton (Mr. Paget), he rested his argument upon the fact that this postwar-credit system was a Coalition measure; that the fact that the present Chancellor was in the Government was neither here nor there and. that it was designed to assist the rich in postwar days. The hon. Member is perfectly entitled to put that point of view but I cannot congratulate him on the research he has made into the history of this matter. The hon. Member was not with us in the last Parliament. Had he been, he would have seen the spectacle of these Benches occupied by his political friends not one of whom raised any query or objection against the postwar credits system when introduced by the late Sir Kingsley Wood. Surely that was the time for those arguments to have been put forward, even in the hon. Member's absence there were others capable of putting forward these arguments to the House as then constituted.
Nor is he alone in that point of view. There was another, that is the Financial Secretary to the Treasury. He the other evening disclosed to the House —we are getting a good deal of confession just lately from right hon. and hon. Members opposite —that he never liked the postwar credit system. We had to make the best of it, he said, but he himself never liked it. I spent a good deal of time in the Library trying to find some record of the Financial Secretary's dislike but I cannot find it in any Debate, and I cannot find it in any Division List. It is true I was absent a good deal during the war years, but I have tried to rectify that by research. If I am doing the right hon. Gentleman an injustice, he will intervene but I am unable to discover that at any time he or any of the Socialist Party objected to the postwar credits scheme.
I am accustomed to getting a daily shock from the hon. Member for South


Nottingham (Mr. N. Smith). He has again intervened. It causes me pain and grief nearly every time he rises, and as for the Chancellor of the Exchequer of the Exchequer, who staggered out just now for some refreshment, I cannot think that a cup of tea will be adequate to sustain him after what has been said. What has the hon. Member for South Nottingham said? Not long ago he disclosed his Stock Exchange activities during the years of the Conservative Government when he was able to make a good deal of money free of Income Tax. Today he has gone a step further. I never expected to hear a supporter of the first majority Socialist Government compare national finances with the Irish Sweepstake. He has just done so. He told us that in a Department during the war computations were made of what they would do with their postwar credits when the war was over and it was just as people did in considering their prospects in the Irish Sweep-stake. I hope I am not doing him an injustice, but if I am the Official Report will disclose it. At any rate I am not giving that impression to my hon. Friends whose sense of audition is equal to that of the hon. Member for Nelson and Colne (Mr. S. Silverman).

Mr. S. Silverman: Mr. S. Silverman indicated dissent.

Lieut.-Commander Braithwaite: The hon. Member for Northampton said that nobody ever envisaged this system continuing into peace time. I did not challenge that remark, but I feel the Committee has this point to consider. When in fact do we reach that stage in our journey which can be described as "postwar"?

Mr. Paget: I do not want to interrupt, but I said nothing of the sort.

Lieut.-Commander Braithwaite: In that case the hon. Member was more irrelevant than I gave him credit for. I thought he was addressing himself to that issue. May I then rest on my own argument? I think we ought to consider when we reach the stage known as postwar. At the end of the 1914–18 conflict the emergency was declared at an end by an Order in Council, I believe in the month of September,1921, although I have not had the opportunity of looking it up. Have we now reached a stage of development where we have passed into the postwar era? The Chancellor seems to think so, the Finan-

cial Secretary seems to think so. If so it opens up an entirely new range of conjecture. The hon. Member for South Nottingham, disappointed in the deferment of the drawing of his postwar credit, can take heart of grace. We ought now to have the war damage payments if we have reached the postwar years. The Government is not going to collect any more War Damage contributions but they are not being paid out. When in fact do we reach the postwar period? I had not intended to detain the Committee — the Committee has been detained by the obfuscations of the hon. Member for South Nottingham and his colleagues behind him, and when one hears rank heresy in the presence of a Socialist Government anxious to impress the country with its rectitude all an hon. Member of the Opposition can do is to lend what support he can to the Chancellor.

Mr. N. Smith: Is the hon. and gallant Member suggesting that it is rank heresy to say, as I say, that these postwar credits are in fact a serious obligation which has to be honoured?

Lieut.-Commander Braithwaite: I made no criticism of that part of his speech. The rank heresy I referred to—and I am glad I brought him to his feet again—

Mr. Evelyn Walkden: I know the hon. and gallant Member is.

Lieut.-Commander Braithwaite: I know there is a frown on the genial countenance of the Parliamentary Secretary to the Treasury (Mr. Whiteley).

Mr. Walkden: The hon. and gallant Member was not noticing the schoolmaster.

6.30 p.m.

Lieut.-Commander Braithwaite: No one knows better than the hon. Member for Doncaster (Mr. Walkden) that those who sit on this side of the Committee have certain responsibilities. He would be the last to deny that for one moment. [An Hon. Member: "When are you going to start?"] I should not advise any sort of interruption otherwise it will not be a question of when I am going to start but of when I am going to finish The Finance Bill is exempted business and I am quite capable of making my observations even more tedious. In the meantime I propose to exercise my duty as a


Private Member to oppose the Government's views. We have not yet reached that stage in the totalitarian State where we may not do so. Now perhaps I may make further attempts to bring my remarks to a conclusion. I am anxious to hear from the Financial Secretary first when his conversion on this matter took place, namely, that postwar credits are undesirable. It obviously was not when Sir Kingsley Wood first introduced them. There is no record of that nor in 1942 and 1943, nor again in 1944.Did he see the light on the road to Damascus on taking office? Was that the occasion? Perhaps he will follow the example of some of his colleagues and engage in a little self confession. In the meantime, is it the Government's view that we are now in the postwar era and is that the reason why credits should be discontinued, and if so they should take the logical course of paying out other commitments such as war damage?

Lieut.-Colonel Nigel Birch: It seems to be the general view that postwar credits are a thoroughly bad thing. But it seems to me that Lord Keynes' idea was a thoroughly good one —the idea that in an inflationary period forced saving was of great value to the country and that in a planned economy resulting purchasing power would be released during times of deflation. We hope there will be a time when there will be a few goods available. That is the time to release purchasing power. All Amendments put forward have been rejected by the Chancellor of the Exchequer on the ground that they are inflationary. The whole point about this Amendment is that it is not inflationary. The present situation is just as inflationary as it was during the war. There is therefore strong reason for continuing the system of postwar credits now and releasing the resulting purchasing power at some more suitable time. As far as the remarks of the hon. Member for Northampton (Mr. Paget) are concerned, not every one entitled to postwar credits is a rich man. I think plenty of us get letters from our constituents, especially old people, asking when the credits are going to be cashed. They are not the rich people of this country. I think the hon. Member's point is really a ridiculous one.

Mr. Pickthorn: This is not one of the subjects on which I feel at all sure that I am better informed or more perspicacious than other Members of the Committee.[Interruption.] I thought I should get that from hon. Members opposite. They are of course equally capable on all subjects. I am not sure whether I can put my question quite exactly, but I will do my best. I understand that the Treasury representatives, and particularly the Financial Secretary, have been asked how it came about that the wireless statement and the supplementary financial statement both ignored any possible minus effect that there might be by this treatment of postwar credits, whereas now it is admitted that there are some 1,250,000 persons who may be deleteriously affected. The question I put is how that difference came about; whether consideration was in the mind of Ministers and their advisers or whether it was not and whether the two statements were not unpardonably misleading if that consideration was in the Ministerial mind, but not alluded to even by way of footnote or in any way whatever.

Sir H. Lucas-Tooth: I support the Amendment. I gather from the Chancellor that he is not prepared to accept that Amendment, and if in the circumstances it goes to a Division, it is unlikely we shall be successful. I should like, therefore, to call attention to the new Clause which stands on the Order Paper in my name. [Option to retain 1945 –46 rate of tax.] The purpose of this Clause is quite simple. It is to give any taxpayer who feels that he is not getting as good a deal under these proposals, as he is under the present dispensation, the option of continuing next year under the present tax law. I submit that there are none of the objections to that Clause which have been advanced from various parts of the Committee this afternoon to others proposed. It is clear what the Chancellor of the Exchequer's attitude is to this question. It is summed up in what he said in the Debate on the Second Reading of this Bill. He then said:
Everybody will be better off, in varying degrees, next year than this, in terms of their incomes; and that is what most people think about. Some people may think only about capital investment, and arrangements for the future but the common view is that it is your


income which you can spend that matters." — [OFFICIAL REPORT, 19th November, 1945; Vol. 416, c. 147.] 
That is the common sense of the proposal which I am now advocating. Those are the words of the Chancellor giving the express attitude of the Government quite clearly. I submit that they show extraordinary cynicism. The effect of the words is this —that as long as you give the taxpayer an increase of immediate spending power he must be happy. That is what those words say and that is the defence of the Government to this proposal. It is not only an impossibly cynical attitude to adopt but it is a most extraordinary attitude on the part of the Chancellor who expects saving to continue at the present level to stop inflation and who requires those savings if he is to give the benefits which are proposed in this Budget. It seems to' me that that attitude is utterly destructive of responsibility. How do you expect people to save, when you have told them that the only thing that matters is what they have to spend? The Chancellor has admitted that taking postwar credits info account, 1,250,000 people will be worse off and it is of course the worthiest section of that 1,250,000 who will be worse off in their pockets. It is that part who are regularly saving money, but who will now have to dip into their pockets and take from their spendable income and make good the savings which have been taken away from them by this Subsection. The purpose of the new Clause which I suggest the Government might accept, is merely to give those people who are adversely affected in this way the right to say "We do not like your proposals and we ask that we may continue as we have in the past year."

Major Legge-Bourke: There are one or two points which have arisen as the result of statements which the right hon. Gentleman the Chancellor of the Exchequer has made. In his Budget speech he said:
The Income Tax postwar credit dates from 1941. Part of each year's Income Tax has been treated in effect as a forced loan from the taxpayer —a very brutal operation." — [OFFICIAL REPORT, 23rd October, 1945; Vol. 41.). c. 1891.]
A little later, on the Second Reading of the Finance Bill, he said this:
What actually happened was that he
—that is the taxpayer —

received on a certain date a piece: of paper saying that His Majesty's Government undertook to pay him at a date to be fixed hereafter a sum of money!''
Later he said:
To be given a piece of paper backed by His Majesty's Government to be payable at a date not yet decided is undoubtedly a benefit." —[OFFICIAL REPORT, 19th November, 1945; Vol. 416, c. 145.]
Now which does the right hon. Gentleman mean? It cannot be an intolerable burden and a benefit at the same time. It does seem to me that the whole disposition of this credit business should be made absolutely clear to the country, for I am sure myself that it is not clear now. During the General Election a great many of my constituents asked me whether postwar credits were worth anything more than the paper on which they are written. I did my best to reassure them that they were worth more than that, because I remembered, rather bitterly, that I had three or four tucked away myself. I do feel that it is only right that the Committee should expect from the Chancellor a statement fully clarifying what he does mean by postwar credits. Perhaps he would give attention to this illustration which does bear on the point I am making.
Let us suppose —if I may be hypothetical for a moment —that a man whom we shall call "A" pays 15 per cent. interest on a loan of £100 which he has got from "B." At the end of two years "B" suddenly decides that the rate is high and he would like to encourage the unfortunate "A" to carry on a bit longer and so he arranges a five per cent. refund per annum, to be paid back when the financial situation is easier. When the end of five years is reached, we shall find that "A" is in a position of having paid £75, and to be £15 in credit on the I.O.U. from "B" on the refund. Now in the sixth year let us suppose that "B" decides to drop the rate of interest from 15 per cent, to 10 per cent., and at the end of the ninth year you will, find, if my calculations are correct, that "A" has paid "B" £115 and he is in credit to "B" for £15.
What I would like the Chancellor to give is an assurance that that is not the policy he is going to adopt for postwar credits. What it will boil down to is this, that no postwar credit will be paid back at all, if you substitute postwar credits


for the five per cent, refund per annum which I mentioned in the example. At the end of that period there is a danger as far as I can see of postwar credits having been written off altogether, that the unfortunate taxpayer not having received one single penny in cash at all, and the Chancellor of the Exchequer will be able to turn round at some future date and say, "By lowering the rate of your tax and by failing to pay you back your postwar credits, we have had no cash transaction whatever and we can now consider. the whole debt written off." [Hon. Members: "No."] If that is the argument a great many people are going to be greatly disturbed and lose their faith even more perhaps than they have already lost it, in the right hon. Gentlemen sitting opposite.

6.45 p.m.

Sir William Darling: I have made many efforts yesterday and today to join in this Debate. I should think this is the most important subject that we shall discuss, and I am particularly impressed by the fact that I find myself tonight speaking for a very large majority of persons who are not persons of substance —persons who have hitherto believed that they were represented by right hon. Gentlemen and hon. Gentlemen opposite. The number of persons to receive postwar credits must be in the neighbourhood of 13,000,000. The great majority of those who have received postwar credits ranging from £65 down-wards are persons of no great financial substance. I wonder if His Majesty's Government, who are deeply concerned with the peace, comfort and happiness of the people of this realm, have taken into account the effect of postwar credits upon many thousands of humble people. Unlike the hon. Members for South Nottingham (Mr. N. Smith), the people with whom I am associated as colleagues in business do not treat them so frivolously. They brought them to me as documents of great value; they came at a time when there was little left in this country but confidence in its Government and its leaders, and they asked me if I would take care of their postwar credits and put them in a cement stronghold. This frivolous doubt as to whether they had any value or not apparently only existed in the minds of those with whom the hon.

Member for South Nottingham apparently consorted.

Mr. N. Smith: Surely the hon. Gentleman knows perfectly well that my statement amounted simply to this: I was telling the Committee just how seriously London printers in the very large office where I happened to work took these postwar credits. I suggest to him that he ought not to use the word "frivolous" in connection with anything I said.

Sir W. Darling: I am sorry, but the hon. Gentleman certainly gave me the impression that in the printing office with which he is associated, these pieces of paper are treated in a frivolous manner and are regarded as comparable with those documents which are issued by the Irish Sweep Committee. If he did not say that, then I failed to hear him correctly and I apologise. If he tells me that the appreciation of those Government documents is high in the printing offices, I will believe him. It was with a shock that I heard him say that the "Natsopas" —am I right in calling them that?

Mr. N. Smith: Yes.

Sir W. Darling: —with whom the hon. Member for South Nottingham is associated, did not think highly of postwar credits. The point I am endeavouring to make is that there are other groups of persons who rate them very highly and who, when much seemed to be going from them, thought that here was something in which they could place their confidence. I feel it was one of the many enlightened measures which came from the distinguished hands of the late Sir Kingsley Wood. He saw —and it was a simple analogy —that the encouragement of savings was important to this community, and he also saw, perhaps from the example of the farmyard, that a nest egg encouraged the laying of other eggs. There are people who do not save, but once they save a few pounds the habit grows with them. These postwar credits put in the minds of many people the possibility of saving money for their own needs and to add to it from other savings. I believe that it was a powerful prop in the financial economy of our country. There were many who, for the first time, appreciated that they had a stake in the country —something which has never been


much admired by right hon. Gentlemen and hon. Gentlemen opposite, but a thing which I think is fundamental. It is a Government bond which is worth what it says it is worth. That is a contribution to the stability of national unity which cannot be over-estimated. I beg His Majesty's Government, who will have thrust upon them troubles enough of their own seeking, not to throw lightly away this number of shareholders who arc deeply interested in the business of the British people. The hon. Member for South Nottingham suggested that they were of little value. That is not the view that I hold, and it is not the view that hon. Gentlemen on this side hold after their Election experiences.

Mr. N. Smith: I did not make the suggestion that these postwar credits were of little value. On the contrary, I went out of my way to have it go forth from this House that all of us, irrespective of party, regarded them as being of their face value one day.

Sir W. Darling: I am grateful for the hon. Gentleman's correction. It was the hon. Member for Northampton (Mr. Paget), and not the hon. Member for South Nottingham.

Mr. Paget: It was not.

Sir W. Darling: It was certainly an hon. Member on the opposite side.

Mr. Gallacher: Try again.

Sir W. Darling: I cannot take the advice of the hon. Member for West Fife (Mr. Gallacher) to try again, because there are too many hon. Gentlemen opposite who are likely to have made an in- discreet statement of that sort.
I want to direct the attention of the Committee to the returning soldiers who have had no chance to establish themselves with any postwar credit. I think I am right in saying that their deduction for postwar credits is 6d. per day. Would it not be financially desirable to continue these postwar credits so that an increasingly larger number of people would have a financial stake in the country, which they would be tempted to enlarge and expand? If it is barriers against inflation that His Majesty's Government seek, this is not one which should be despised.
The objection to this Clause, so I understood —I am careful in my under-

standings now, and I hope I will be corrected if I am wrong —was that the Chancellor said we could not afford the addition of £105,000,000 to the National Debt. The addition of £105,000,000 to the National Debt, he said, would be an addition to the wealth and purchasing power of the citizens of this country. If all the additions to the National Debt were as free from the suggestion of blame as that, I would not be unduly troubled about the National Debt. How much is this National Debt, to which the Chancellor is so reluctant to add this comparatively small sum of postwar credits? There are hon. Gentlemen present who know how much the National Debt is, but I have to indulge in some research in order to be in a position to tell the Committee what it is. In September, 1945, according to my research, it was £23,551,000,000.

Mr. Kirkwood: Is that all?

Sir W. Darling: I do not suppose that surprises the hon. Gentleman. At his' age nothing surprises him. On 8th September, 1945, according to my research, the National Debt was £23,551,000,000 gross. His Majesty's Government, which cannot afford postwar credits, propose to nationalise coal which some say will cost £200,000,000.

The Temporary Chairman (Colonel Sir Charles MacAndrew): I think the hon. Gentleman is getting far away from this Clause.

Sir W. Darling: I am endeavouring to meet the argument of the Chancellor of the Exchequer that we could not afford the sum of £105,000,000, and I was venturing 'to suggest to the Committee that it is strange that an Administration, which can afford and proposes to afford, sums very considerably larger than £105,000,000 with equanimity, is disinclined to contemplate a comparatively small addition to the finances of a large number of small wage earners and relatively poor people in this country. However, as you say that is irrelevant, Sir Charles, I accept your direction and move to my conclusion encouraged by a good deal of support from hon. Members opposite. I am even disappointed in them. My conclusion is that this postwar credit has been, in the correct sense, a much more valuable and popular piece of finance than the Chancellor of the


Exchequer and his supporters recognise. For the first time the people of this country have not had to go and buy bonds or shares. They have been given a postwar credit. Is it not something to have linked these millions who never before were linked financially with the Government? Is that not considerably preferable than that you should bind these shareholders to you with bonds of steel? It is for the Government to say whether it would be wise or unwise, but I am convinced, from the point of view of my constituents and of hundreds of thousands of others in this country, that it would be unwise to abolish the postwar credit.

Colonel Oliver Stanley: I rise only to ask whether we are to have a reply to this Debate. The right hon. Gentleman the Chancellor of the Exchequer, I think, listened to one speech, which was my own. It was very kind of him to assume that in that speech would be contained all the arguments worth hearing, but he was wrong, and since then he has left the Committee. We have no complaint about that; he has, no doubt, gone to "fortify the revenue," as it: is commonly called. Since then the defence of the Government on this most important Amendment has been left to the hon. Member for Northampton (Mr. Paget). Frankly, I do not think the choice in this respect was wise, because I think his defence of the Government has been an extremely dangerous one. It has been said, in effect, that the whole of the system of postwar credits was a Tory ramp. It was done by a Government of which, of course, his right hon. Friend was a Member, but, as he pointed out, the right hon. Gentleman was so weak willed and powerless that he could not prevent it, and it was done by the Coalition Government in order to help the rich. Of course, with a new Government something quite different was going to be done. If the hon. Gentleman thinks that postwar credits are a Tory ramp and that the only people who are going to gain from postwar credits are the rich, had he better not go the whole hog, and say that he and his party are not only going to abolish postwar credits for the future, but repudiate them for the past? His statement that postwar credits were a Tory ramp, must raise in every holder of these pieces of paper a doubt as to what are the intentions of the Government. In

view of that, I think this Committee is entitled—

Mr. Paget: The position was this. Postwar credits were introduced when Income Tax payers were a comparatively small minority. Then, later on, the Income Tax payers increased enormously in numbers, and a number of people got a slice of this postwar credit cake which was never intended for them.

7.0 p.m.

Colonel Stanley: That is a most extraordinary argument. If it means anything it means that all postwar credits should continue if enough people are getting them. The hon. Gentleman then would support this Amendment, because on his own showing something like 13,000,000 people should, in fact, be getting postwar credits. In view of the confusion and alarm which will be caused by the hon. Member's speech I think we are entitled to some remarks from the Financial Secretary to the Treasury, who has sat patiently through the Debate and is obviously prepared to clear up this dilemma. We can assure him that he will be received not only with the usual courtesy but with almost the feelings one has towards one making a maiden speech.

The Financial Secretary to the Treasury (Mr. Glenvil Hall): I thought that the reply for the Government had already been made by the Chancellor of the Exchequer himself and there is no one better who could give the reply. It is quite a common thing for the Minister in charge of a Bill to make a reply and then for speeches, particularly from the Opposition side, to be made after he has sat down, and no one thinks any the worse of him if he does not get up to reply to what has been said since he first spoke. I have no desire to detain the Committee. The answer given by the Chancellor of the Exchequer is the only answer that I can give, and I now repeat it. It is that he cannot accept this Amendment, for the reasons that he gave. It would mean putting to the credit of 13,000,000 people a sum of £105,000,000 this next year. Of that number of people 11,750,000, and possibly 12,000,000, are already getting, or will get in the next financial year, out of the concessions already made, more than the full postwar credit to which they are entitled this year, and which they are going to get. It would be indefensible


in the view of the Chancellor of the Exchequer and of the Government, if postwar credits covering the earned income allowances' difference were now given to them in addition to the 1,000,000 or 1,250,000 people to whom reference has been made in the Committee today who on certain assumptions have suffered — and that is admitted —a small difference because of the fact that we have not put back the allowances on earned incomes to the same rate as they were in 1941, when postwar credits were introduced. For that reason, if for no other, it is impossible for the Government to accept this Amendment, which would give to nearly 12,000,000 people something to which they are not entitled and would mean an eventual cost of £105,000,000 to the Exchequer.

Sir H. Lucas-Tooth: May I ask whether the Government are prepared to accept my Amendment when we come to it?

The Temporary Chairman: I have already said that that Amendment will not be selected.

Mr. Pitman: 1 should like to press for an answer to my question. I have asked

Division No. 32.]
AYES.
[7.6 p.m.


Adams, W. T. (Hammersmith, South)
Byers, Lt.-Col. F.
Evans, E. (Lowestoft)


Adamson, Mrs. J. L.
Callaghan, James
Evans, S. N. (Wednesbury)


Allen, A. C. (Bosworth)
Champion, A. J.
Ewart, R.


Allen, Scholefield (Crewe)
Chater, D.
Fairhurst, F.


Alpass, J. H.
Chetwynd, Capt. G. R.
Farthing, W. J.


Anderson, A. (Motherwell)
Clitherow, R.
Fletcher, E. G. M. (Islington, E.)


Anderson, F. (Whitehaven)
Cluse, W. S.
Foot, M. M.


Attewell, H. C.
Cobb, F. A.
Forman, J. C.


Awbery, S. S.
Cocks, F. S.
Foster, W. (Wigan)


Ayles, W. H.
Collick, P.
Fraser, T. (Hamilton)


Ayrton Gould, Mrs. B.
Collindridge, F.
Freeman, Maj. J. (Watford)


Bacon, Miss A.
Collins, V. J.
Freeman, P. (Newport)


Baird, Capt. J.
Colman, Miss G. M.
Gaitskell, H. T. N.


Balfour, A.
Cook, T. F.
Gallacher, W.


Barnes, Rt. Hon, A. J.
Corbet, Mrs. F. K. (Camb'well, N.W.)
George, Lady M. Lloyd (Anglesey)


Barstow, P. G.
Corlett, Dr. J.
Gibbins, J.


Barton, C.
Corvedale, Viscount
Gibson, C. W.


Battley, J. R.
Cove, W. G.
Gilzean, A.


Bechervaise, A. E.
Crossman, R. H. S.
Glanville, J. E. (Consett)


Belcher, J. W.
Daggar, G.
Gooch, E. G.


Benson, G.
Daines, P.
Goodrich, H. E.


Berry, H.
Dalton, Rt. Hon. H.
Greenwood, Rt. Hon. A.


Beswick, Fit.-Lieut. F.
Davies, A. E. (Burslem)
Grenfell, D. R.


Binns, J.
Davies, Ernest (Enfield)
Grey, C. F.


Blackburn, A. R.
Davies, Harold (Leek)
Grierson, E.


Blenkinsop, Capt. A.
Davies, Haydn (St. Pancras, S.W.)
Griffiths, D. (Rother Valley)


Boardman, H.
Deer, G.
Griffiths, Rt. Hon. J. (Llanelly)


Bottomley, A. G.
Diamond, J.
Guest, Dr. L. Haden


Bowden, Fig.-Offr. H. W.
Dobbie, W
Gunter, Capt. R. J.


Bowles, F. G. (Nuneaton)
Dodds, N. N.
Guy, W. H.


Braddock, Mrs. E. M. (L'p'l, Exch'ge)
Douglas, F. C. R.
Haire, Flt.-Lieut. J. (Wycombe)


Braddock, T. (Mitcham)
Driberg, T. E. N.
Hall, W. G. (Colne Valley)


Brook, D. (Halifax)
Dumpleton, C. W.
Hamilton, Lieut.-Col. R.


Brooks, T. J. (Rothwell)
Durbin, E. F. M.
Hannan, W. (Maryhill)


Brown, George (Belper)
Dye, S.
Hardy, E. A.


Brown, T. J. (Ince)
Edelman, M.
Henderson, A. (Kingswinford)


Bruce, Maj. D. W. T.
Edwards, Rt. Hon. Sir C. (Bedwellty)
Hewitson, Captain M.


Burden, T. W.
Edwards, John (Blackburn)
Hicks, G.


Burke, W. A.
Edwards, N. (Caerphilly)
Hobson, C. R.


Butler, H. W. (Hackney, S.)
Edwards, W. J. (Whitechapel)
Holman, P.

it of the Chancellor of the Exchequer and I have asked it, through my hon. Friend, of the Financial Secretary. It arises over this point. Now that we have come to the situation that postwar credits are not to foe granted this document is entirely false, and will never have a chance of being accurate again, unless we carry our Amendment, because it shows clearly that a married man with no children with an income of £200 a year is having a tax reduction of £13, whereas, in point of fact, if he has £204 he has an increase of 10s. 10d. in tax, and the whole country has been misled by this document. There is no footnote to this, no covering remark, nothing.

Sir W. Darling: Cannot an answer be given? A question has been put.

The Temporary Chairman: If no other hon. Member rises to speak it is my duty to put the Question.

Question put, "That the words proposed to be left out stand part of the Clause."

The Committee divided: Ayes, 294; Noes, 155.

Hoy, J.
Murray, J. D.
Stamford, W


Hudson, J. H. (Ealing, W.)
Nally, W.
Steels, T.


Hughes, Hector (Aberdeen, N.)
Naylor, T. E.
Stephen, C.


Hughes, Lt. H. D. (W'lhantpton, W.)
Neal, H. (Claycross)
Stewart, Capt. M. (Fulham)


Hynd, H. (Hackney, C.)
Nichol, Mrs. M. E. (Bradford, N.)
Strauss, G. R.


Isaacs, Rt. Hon. G. A.
Nicholls, H. R. (Stratford)
Stross, Dr. B.


Janner, B.
Noel-Baker, Capt. F. E. (Brentford)
Stubbs, A. E.


Jeger, Dr. S. W. (St. Pancras, S.E.)
Noel-Buton, Lady
Swingler,' Capt. S.


Jones, J. H. (Bolton)
O'Brien, T.
Symonds, Maj. A. L.


Jones, Maj. P. Asteley (Hitchin)
Oldfield, W. H.
Taylor, H. B. (Mansfield)


Keenan, W.
Oliver, G. H.
Taylor, R. J. (Morpeth)


Kendall, W. D.
Orbach, M.
Taylor. Dr. S. (Barnet)


Kenyon, C.
Paget, R. T.
Thomas, I. O. (Wrekin)


Kinghorn, Sqn.-Ldr. E.
Paling, Rt. Hon. Wilfred (Wentworth)
Thomas, George (Cardiff)


Kirby, B. V.
Paling, Will T. (Dewsbury)
Thomson, Rt. Hon. G. R. (E'b'gh, E.)


Kirkwood, D.
Palmer, A. M. F.
Thorneycroft, H.


Lang, G.
Pargiter, G. A
Thurtle, E.


Layers, S.
Parkin, Flt.-Lieut. B. T.
Tiffany, S.


Lee, F. (Hulme)
Paton, Mrs. F. (Rushcliffe)
Tolley, L.


Lee, Miss J. (Cannock)
Paton, J. (Norwich)
Tomlinson, Rt. Hon. G.


Levy, B. W.
Pearson, A.
Turner-Samuels, M.


Lewis, A. W. J. (Upton)
Pearl, Capt. T. F.
Ungoed-Thomas, Maj. L.


Lewis, J. (Bolton)
Perrins, W.
Usborne, Henry


Lindgren, G. S.
Piratin, P.
Vernon, Maj. W. F.


Little, Dr. J.
Platts-Mills, J. F. F.
Viant, S. P.


Logan, D. G.
Popplewell, E.
Wadsworlh, G.


Longden, F.
Pritt, D. N.
Waikden, E.


Lyne, A. W.
Pryde, D. J.
Walker, G. H.


McAdam, W.
Pursey, Cmdr. H.
Wallace, G. D. (Chislehurst)


McAlister, G.
Ranger, J.
Wallace, H. W. (Walthamstow, E.)


McEntee, V. La T.
Rankin, J.
Watson, W. M.


McGhee, H. G.
Rees-Williams, Lt.-Col. D. R.
Webb, M. (Bradford, C.)


McGovern, J
Reeves, J.
Weitzman, D.


Mack, J. D.
Reid, T. (Swindon)
Wells, P. L. (Faversham)


McKjnlay, A. S.
Rhodes, H.
Wells, Maj. W. T. (Walsall)


Maclean, N. (Govan)
Richards, R.
White, H. (Derbyshire, N.E.)


McLeavy, F.
Ridealgh, Mrs. M.
Whiteley, Rt. Hon. W.


MacMlillan, M. K.
Robens, A.
Whittaker, J. E.


Macpherson, T. (Romford)
Roberts, G. O. (Caernarvonshire)
Wigg, G. E. C.


Mainwaring, W- H.
Robertson, J. J. (Berwick)
Wilcock, Group-Capt. C. A. B.


Mann, Mrs. J.
Rogers, G. H. R.
Wilkins, W. A.


Manning, C. (Camberwell, N.)
Royle, C.
Willey, F. T. (Sunderland)


Manning, Mrs. L. (Epping)
Sargood, R.
Willey, O. G. (Cleveland)


Marquand, H. A.
Scott-Elliot, W.
Williams, D. J. (Neath)


Marshall, F. (Brightside)
Sharp, Lt.-Col. G. M.
Williams, J. L. (Kelvingrove)


Mathers, G.
Silkin, Rt. Hon. L.
Williams, Rt. Hon. T. (Don Valley)


Maxton, J.
Silverman, J. (Erdington)
Williamson, T.


Medland, H. M.
Silverman, S. S. (Nelson)
Willis, E.


Middleton, Mrs. L.
Skeffington, A. M.
Wills, Mrs. E. A.


Mikardo, tan
Skinnard, F. W.
Wise, Major F. J.


Milchison, Maj. G. R.
Smith, Capt. C. (Colchester)
Woodburn, A.


Monslow, W.
Smith, Ellis (Stoke)
Wyatt, Maj. W.


Montague, F.
Smith, Norman (Nottingham, S.)
Yates, V. F.


Morgan, Dr. H. B.
Smith, S. H. (Hull, S.W.)
Young, Sir R. (Newton)


Morley, R.
Smith, T. (Normanton)
Younger, Maj. Hon. K. G.


Morris, P. (Swansea, W.)
Snow, Capt. J. W.
Zilliacus, K.


Morris, Hopkin (Carmarthen)
Solley, L. J.



Mort, D. L.
Sorensen, R. W.
TELLERS FOR THE AYES:


Moyle, A.
Soskice, Maj. Sir F.
Mr. J. Henderson and Mr. Simmons.




NOES.


Agnew, Cmdr. P. G.
Channon, H.
Fraser, Lt.-Col. Sir t. (Lonsdale)


Aitken, Hon. M.
Clarke, Col. R. S.
Gage, Lt.-Col. C.


Allen, Lt.-Col. Sir W. (Armagh)
Cole, T. L.
Galbraith, Cmdr. T. D.


Amory, Lt.-Col. D. H.
Cooper-Key, Maj. E. M.
Gammans, Capt. L. D.


Anderson, Rt. Hn. Sir J. (Scot. Univ.)
Corbett, Lieut.-Col. U. (Ludlow)
George, Maj. Rt. Hn. G. Lloyd (P'br'ke)


Assheton, Rt. Hon P.
Crookshank, Capt. Rt. Hon. H. F. C.
Glossop, C. W. H.


Baldwin, A. E.
Crosthwaite-Eyre, Col. O. E.
Glyn, Sir R.


Barlow, Sir J.
Crowder, Capt. J. F. E.
Gomme-Duncan, Col. A. G.


Baxter, A. B.
Cuthbert, W. N.
Gridley, Sir A.


Beamish, Maj. T. V. H.
Darling, Sir W. Y.
Grimston, R. V.


Bennett, Sir P.
Davidson, Viscountess
Hannon, Sir P. (Moseley)


Birch, Lt.-Col. Nigel
Dodds-Parker, Col. A. D.
Hare, Lt.-Col. Hon. J. H. (Woodbridge)


Boothby, R.
Donner, Sqn.-Ldr. P. W.
Harvey, Air-Cmdre. A. V.


Bower, N.
Dower, Lt.-Col. A. V. G. (Penrith)
Haughton, Maj. S. G


Boyd-Carpenter, Maj. J. A.
Drayson, Capt. G. B.
Headlam, Lt.-Col. Rt. Hon. Sir C.


Bracken, Rt. Hon. Brendan
Duthie, W. S.
Hinchingbrooke, Viscount


Braithwaite, Lt. Comdr. J. G.
Eccles, D. M.
Hogg, Hon. Q.


Bromley-Davenport, Lt.-Col. W.
Eden, Rt. Hon. A.
Hollis, Sqn.-Ldr. M. C.


Buchan-Hepburn, P. G. T.
Erroll, Col. F. J.
Holmes, Sir J. Stanley


Butcher, H. W.
Fletcher, W. (Bury)
Hope, Lt.-Col. Lord J.


Butler, Rt. Hon. R. A. (S'ffr'n W'ld'n)
Foster, J. G. (Northwich)
Howard, Hon. A.


Carson, E.
Fox, Sqn.-Ldr. Sir G.
Hudson, Rt. Hon. R. S. (Southport)


Challen, Fit.-Lieut. C.
Fraser, Mai. H. C. P. (Stone)
Hulbert, Wing-Comdr. N. J.







Hurd, A.
Morrison, Maj. J. G. (Salisbury)
Snadden, W. M.


Hutchison, U.-Cdr. Clark (Edin'gh, W.)
Morrison, Rt. Hn. W. S. (Cirencester)
Spearman, A. C. M.


Hutchison, Lt.-Col. J. R. (G'gow, C.)
Mott-Radclyffe, Maj. C. E.
Spence, Maj. H. R.


Jarvis, Sir J.
Neven-Spence, Major Sir B.
Stanley, Col. Rt. Hon. O.


Jeffreys, General Sir G.
Nicholson, G.
Stoddart-Scott, Col. M.


Joynson-Hicks, Lt.-Cdr. Hon. L. W.
Noble, Comdr. A. H. P.
Stuart, Rt. Hon. J.


Kingsmill, Ll.-Col. W. H.
Nutting, Anthony
Sutcliffe, H.


Lambert, G.
Osborne, C.
Taylor, C. S. (Eastbourne)


Lancaster, Col. C. G.
Peake, Rt. Hon. O.
Teeling, Flt.-Lieul. W.


Law, Rt. Hon. R. K.
Pickthorn, K.
Thomson, Sir D. (Aberdeen, S.)


Legge-Bourke, Maj. E. A. H.
Pitman, I. J.
Thorneycroft, G. E. P.


Lindsay, Lt.-Col. M. (Solihull)
Ponsonby, Col. C. E.
Thornton-Kemsley, Col. C. N.


Linstead, H. N.
Poole, Col. O. B. S. (Oswestry)
Thorp, Lt.-Col. R. A. F.


Lipson, D. L.
Prescott, Capt. W. R. S.
Touche, G. C.


Lloyd, Maj. Guy (Renfrew, E.).
Price-White, Lt.-Col. D.
Vane, Lt.-Col. W. M. T.


Lloyd, Brig. J. S. B. (Wirral)
Prior-Palmer, Brig. O.
Wakefield, Sir W. W.


Lucas-Tooth, Sir H.
Raikes, H. V.
Walker-Smith, Lt.-Col. D.


Mackeson, Lt.-Col. H. R.
Ramsay, Maj. S.
Ward, Hon. G. R.


Maclean, Brig. F. H. R. (Lancaster)
Reid, Rt. Hon. J. S. C. (Hillhsad)
Watt, Sir G. S. Harvie


MacLeod, Capt. J.
Renton, Maj. D.
Wheatley, Lt.-Col. M. J.


Macmillan, Rt. Hon. Harold
Roberts, H. (Handsworth)
White, Sir D. (Fareham)


Macpherson, Maj. N. (Dumfries)
Roberts, Maj. P. G. (Ecclesall)
White, Maj. J. B. (Canterbury)


Manningham-Buller, R. E.
Robinson, Wing-Comdr. Rol3nd
Williams, C. (Torquay)


Marlowe, A. A. H.
Ropner, Col. L.
Williams, Lt.-Cdr. G. W. (T'nbr'gi)


Marples, Capt. A. E.
Sanderson, Sir F.
Wimerlon, Rt. Hon. Earl


Marshall, Comdr. D. (Bodmin)
Scott, Lord W.
Young, Maj. Sir A. S. L. (Partick)


Mauds, J. C.
Shephard, S. (Newark)



Medlicott, Brig. F.
Smites, Lt.-Col. Sir W.
TELLERS FOR THE NOES:


Mellor, Sir J.
Smith, E. P. (Ashford)
Mr. Drewe and Mr. Studholme.


Molson, A. H. E.
Smithers, Sir W.

Clause ordered to stand part of the Bill.

CLAUSE 16. — (Appointed day joy Part IV of Finance Act, 1944, and Income Tax Act,1945.)

Motion made, and Question proposed, "That the Clause stand part of the Bill."

7.15 p.m.

Sir Wavell Wakefield: I want to ask the Financial Secretary to the Treasury to explain why it is that the appointed day is 6th April, 1946. That day implements the Finance Act, 1944, and the Income Tax Bill, 1945, under which certain reliefs may be given for expenditure on scientific development and research. In his speech on the Second Reading of the Bill, the Financial Secretary pointed out that this Clause is of very considerable importance to industry, and I think we all agree with that statement. It is of great value to industry that help should be given for scientific research by permitting reductions to be made as an expense in computing the profits for the purpose of Income Tax and that relief should be given on expenditure of a capital nature for scientific research. I want to put a question to the Financial Secretary. Why is it that the appointed day has been delayed from October or November until April? I fully realise that expenditure incurred now for the purposes described is allowable for relief after the appointed day; that is to say although it is incurred now, relief can be obtained after the appointed day. I want to know

why such relief cannot be obtained now. Why cannot the appointed day be, say, 1st October or 1st November? If this Clause is of such importance to industry, surely relief shoud be granted now.
When this question was raised in 1944 and again in 1945,the war was still on, and there was good reason for delaying the appointed day, and delaying expenditure on research and development for peacetime purposes; but that reason is no longer valid. Surely, it is up to the Government to give all possible encouragement for research and development to take place now. Surely, industry ought to be encouraged by a lead from the Government. If there is delay until next year, if there is a wait until April, 1946, surely industry will think that there is no urgency in this matter, and that the Government do not feel it is as important as the Financial Secretary indicated in his speech in the Second Reading Debate. It seems to me, therefore, that an explanation is due as to the reason for this delay. I can well understand that some small firms might delay in appointing scientists to carry out research and do work of value, because the benefits will not become available until next April. We do not want that to happen. Industry in this country has leeway to make up. We have to meet great competition from America, and every possible advantage, every effort, every piece of initiative, that can be at the country's command ought to be used. Therefore, I appeal to the Financial Secretary to reconsider this


Clause on the Report stage in order to see whether this date cannot be advanced so that the effects of the very valuable provisions in the 1944 and 1945 Acts can be made available now instead of in April of next year. I hope that, unless some very satisfactory explanation is forthcoming, the Financial Secretary will be able to agree to this proposal.

Mr. Glenvil Hall: The hon. Member for St. Marylebone (Sir W. Wakefield) put down an Amendment in the sense in which he has spoken, and had that Amendment been called I would have had to resist it for the very simple reason that the thing he wants to do can now be done even with the date fixed—as the Chancellor of the Exchequer said it must be fixed—at 6th April, 1946. I might perhaps briefly remind the Committee that this Clause does fix the appointed day for bringing into operation the allowances of various kinds, both for capital equipment and for expenditure on research of various kinds, and in both cases expenditure that has been incurred, in so far as the balance is concerned, can be, under the terms of the Bill, considered as though it had been incurred on 6th April, 1946. Therefore, expenditure that is being incurred now—and in some cases, as far as research expenditure is concerned, from January, 1937, and as far as capital expenditure on buildings, plant and machinery is concerned, from April, 1944 —if it complies with the 1944 Act and the Income Tax Act, 1945, can be reckoned; but notionally it will be assumed that the expenditure has been incurred on and from 6th April, 1946, so that no trader now is really at a disadvantage. These allowances are to help postwar development and postwar recovery, and although it is true that in some instances expenditure on re-equipment has been undertaken, nevertheless the bulk of it will be incurred, and necessarily incurred because of wartime restrictions, after 6th April, 1946. Therefore, both types are covered; those who have been fortunate enough to have some of their re-equipping done now will get the allowances when the appointed date comes on 6th April, 1946, and those who are forced for various reasons to go in for their renewals, repairs, reconditioning and new plant after 6th April will also get them. It was thought fairer all round that that date

should be fixed. It is for those reasons that I would have had to ask the Committee to reject the Amendment if it had been called.

Viscount Hinchingbrooke: I do not think the Financial Secretary's reply is entirely satisfactory. It seems to me that small firms which have not very great cash resources, and which are being asked to wait for a period of six months before the expenditure which they will now incur can be charged against their accounts, according to the terms of the Bill, will be out of pocket in so doing. If the appointed day were made now, at a time when the war has ended and firms have begun to develop their plans for the future, they could immediately settle their accounts in accordance with the provisions of the Finance Bill and proceed to make cash payments to the scientific firms to which they want to contribute and to the manufacturers supplying them with capital equipment. That is the first point I want to make— that the cash resources of a small firm might prohibit something being done now owing to the fixing of this date.
7.30 p.m.
The second point I want to make is with regard to current expenditure. I am not sure that the Financial Secretary's reply on that aspect is entirely satisfactory. On the Second Reading of the Finance Bill, the Financial Secretary said that any capital expenditure now being incurred is not deprived of the new allowance, but will rank for the allowance, though it would not become effective until 6th April next. The Financial Secretary also said:
I should also make it clear that the provisions for allowance on capital expenditure on research extend to buildings and plant provided after January, 1937."—[OFFICIAL REPORT, 19th November, 1945; Vol. 416, c 45.]
Every word of what he said then related to capital expenditure. The intention of the Finance Act, 1944, inter alia, was to provide 'for any current expenditure on scientific research, or payments to any scientific research association, being allowed to be set off. We have had no word about that. Would the Financial Secretary also answer that point?

Question put, and agreed to.

Clause ordered to stand part of the Bill.

Clause 17. — (Extension to 1945 –46 of s.11 of Finance (No.2) Act, 1939.)

Motion made, the Question proposed, "That the Clause stand part of the Bill."

Captain Crookshank: What is this Clause all about? It looks a very little thing, and it may be common form but —(Interruption.) I am sorry, but if a Clause is as complicated-looking as this is, and one which an ordinary person cannot understand, it seems to me that, if I should courteously ask if there is anything in it, the Committee should be prepared to hear the reply.

Mr. Glenvil Hall: I should explain that this Clause has appeared in a previous Finance Bill, and that all we are doing now is to continue an arrangement come to in the early days of the war. This dealt chiefly with the case where a man went into the Forces and had his income suddenly and drastically reduced, as in the case of a man going from an office job into the Army on a soldier's pay, and before P.A.Y.E. came in. That man would have been assessed on his income for the previous year, and, unfortunately for him, would be paying Income Tax on the previous year's income out of his soldier's pay, and that, clearly, became difficult to do. I put it no higher or lower than that, and it was decided that, where his income suffered —went down, I think, by four-fifths, although I have forgotten the exact percentage —he could go to the Income Tax inspector and an adjustment could be made, and he could then have his income assessed on his actual income for the year and not on his income for the previous year, on which normally, under Schedule E, he would have had his assessment made.

Captain Crookshank: 1 am much obliged to the Financial Secretary, and I am sure the Committee is as well, including the hon. Member who said he did not understand it.[Interruption.]It is quite clear from what the hon. Gentleman has said that what I thought actually is the case, and that, where there was a big diminution of income on a man being called up, this arrangement was made. What puzzled me was why it still occurred when we have already gone over to the new system and have collected current amounts from so many people in discharge of their obligations in respect of Income Tax.

Mr. Glenvil Hall: I am sorry, but I should have covered that point, too. The short answer is, that not every one who goes into the Forces even now is under Schedule E, and, as the right hon. and gallant Gentleman knows, some people are still assessed under other Schedules, such as Schedule D, and it is to enable those cases to be dealt with by the Inland Revenue in a legal way that this arrangement was made.

Sir W. Darling: Could the Financial Secretary help me in regard to a difficulty? This concerns a man who has left his work to become a soldier. Has the inverse process been taken care of? I have in mind the case of a visitor whom I received yesterday, a lieut.-colonel at £900 a year, who is returning to a post, and is quite happy to take it, where his income will be £250 a year, on which he will pay Income Tax on the income of the previous year.

Question put, and agreed to.

Clause ordered to stand part of the Bill.

CLAUSE 18. —(Tax free annuities, etc.)

Motion made, and Question proposed, "That the Clause stand part of the Bill."

Captain Crookshank: We were indebted, on an earlier stage, for a description of the kind of cases covered here, and I am sure that anybody who heard the Solicitor-General was grateful for what he said. The only question I would ask is whether he can advise us whether there is any change in this Clause from the situation described before. If it is exactly the same, there is nothing more to be said.

The Solicitor-General (Major Sir Frank Soskice): In answer to the right hon. and gallant Gentleman, I can assure him that the Clause, as drafted, simply bears out the proposal put forward on the Financial Resolution.

Mr. Diamond: This is a small point, but perhaps the Solicitor-General could give me an answer. It does not refer to an increase or diminution of revenue, so far as the Chancellor is concerned. This is an important Clause, because it is an example of the State interfering with a contract made between two subjects. It interferes with that contract to this extent. It says that, whereas it was the intention of the person entering into the contract that he should bear


the whole of the increase that might arise as the result of increased rates of tax, the State now intervenes and says that that shall not happen after a certain point. It says that the recipient shall bear that increase in tax. Quite obviously, there are many cases where it was not considered possible that an increase of tax from 5s. 6d. to 10s. in the £ would arise, and, quite clearly, there is a good deal of justification for the Clause as it existed previously, namely, that, so long as the tax is 10s. in the £, this arrangement would apply and the State was justified in interfering with a contract between two subjects so long as the tax was 10s. in the £. This Clause seems to go a good deal further, and states that, for all time in future, so long as the tax is higher than 5s. 6d. in the £, the recipients of the benefit under the contract shall bear part of the increase, and it seems to me clear that, although it is very difficult to say at what point the division should arise, there seems very good reason for saying that it should not arise at the particular point at 5s. 6d.
May I take the case of a man who entered into a deed of covenant in 1938, when the rate of tax was 5s. 6d. in the £, and who specifically entered into a covenant in a form whereby the grantee should receive a sum after deduction of tax? He has specifically decided, instead of entering into a form of contract in the normal way, that the recipient should not be prejudiced by any increase in the rate of Income Tax. In other words, whatever that man had in mind as to the possible rate of Income Tax, he was quite clear that, if the rate should go up from 5s. 6d., the grantee should not be prejudiced, at all events, to that extent. We realise that, when the rates of tax went up to 7s. and then to 8s. 6d. in the £, the State did not, at that point of time, attempt to interfere in a contract between two subjects. It is only now, when the tax is on the way down, that a Clause is being inserted in the Bill which is going to cover, for all time, the position between two parties for this type of contract where the rate of tax is not specified at 5s. 6d. in the £. I would ask the Financial Secretary whether he is satisfied that 5s. 6d. is the right figure, or whether this matter should not be further reviewed, bearing in mind that it cannot affect the revenue to the extent of one penny, and the fact that,

whatever this person making the covenant in 1938 had in mind, of one thing he was certain, and that was that, if the rate of tax went up, he should bear some part of it.

The Solicitor-General: If I understand the argument of my hon. Friend it really involves a challenge to the whole system which was incorporated in the Act of 1941. Once you have accepted that it is justifiable for the State to interfere and to shift the incidence of burden on to the annuitant from the trustee, as we did in the Act of 1941,all that is being done now is simply an extension of that; it is filling in the gaps which were left. If one accepts, as we did in 1941, that it is justifiable that the annuitant should suffer and not the trustee —and I submit that it is undoubtedly so because the trustee might frequently find himself under an obligation to pay much more than he had to pay with —what we are doing here is to provide a convenient sliding scale to prevent fresh Amendments each year. That is entirely in accordance with the principle of the 1941 Act. Therefore, I ask the Committee to say that this Clause should stand, because it is no more than the bare minimum to achieve what I have just said.

Question put, and agreed to.

Clause ordered to stand part of the Bill.

Clause 19.—(Application of Rules 19 and 21 of the General Rules to interest, etc., payable by local authorities.)

Mr. Benson: I beg to move, in page 15, line 46, after "person," insert "other than a local authority."
I think that all local authorities will be grateful to the Chancellor for Subsections (1) and (2) of this Clause, but I am not certain that they will be anything like so grateful for Subsection (3), with which my Amendment deals, because Subsection (3) —which is a definite limitation on the first two Subsections —may involve, if the Board of Inland Revenue take a rather narrow view of the legal position which Subsection (3) attempts to stabilise, a considerable amount of litigation. Because Subsection (3) is a limitation on Subsections (1) and (2), I might explain what the Clause does. Most local authorities have profit-making enterprises, and


on the profits they have to pay Income Tax, like any other profit-maker. They pay Income Tax on their gas and electricity profits. They also have certain services which are paid out of the rates —education, roads, health, and a good many others. In order to give these services, they have had to borrow on capital account considerable sums, and on those borrowings they pay interest. As a result of a number of local Acts, one or two national Acts, and certain legal decisions, local authorities now have the right to set off the interest they pay against the profits that they make out of their undertakings, before they pay Income Tax. These rights of set-off vary from local authority to local authority, according to the local Act under which they work, and Clause 19 generalises these rights and gives them fully to all local authorities, irrespective of what their private Acts had given.
7.45 p.m.
Subsection (3), however, is a potential limitation of this right. This right to offset interest against profits is likely to be endangered by the tendency of recent legislation to transfer the services of local authorities, particularly non-county boroughs, to the county councils. For instance, in 1029 the Local Government Act transferred the responsibility of certain roads from the non-county borough to the county council. In 1944 the Education Act transferred, in the case of a large number of authorities, the schools to the county councils. This year we have the Police Bill, which will transfer, in the case of a number of authorities, the police and all the police buildings, etc., which the local authority has hitherto held, and in future there may well be a transfer of the health services as well, to the county council.
The effect of this transfer of property from the non-county borough or maybe the urban district council to the county council, has the effect of changing the liabilities of the borough or council in legal form though not in substance, and the effect of this change in the form of the liability has resulted in the fact that the local authority is subject possibly to a considerable increase in the amount of Income Tax it has to pay, and that increase in Income Tax will be a purely fortuitous windfall to the Board of Inland Revenue.
This is all rather complicated. May I give an example because it is always much simpler to deal in examples? Perhaps it is as well that I should take my own local authority of Chesterfield because Chesterfield was one of the pioneers in its local Acts. It achieved the first really watertight Act, and many other local authorities have copied what are called the Chesterfield clauses. Chester-field is a non-county borough. It had a very fine educational system of which it was very proud. That now, under the Education Act of last year, vests in the county council, including the schools which Chesterfield built —and it built many fine new schools. But although these schools now vest in the county council, but the mortgages which Chester-field raised for the purpose of building them are still a legal liability upon the Chesterfield rates, because they cannot be transferred —owing to the fact that the mortgages may be part of a mixed mortgage and it is the local Chesterfield rates that are pledged. Chesterfield still pays the interest on those rates, and that interest hitherto has been allowed to be set off against its profits before assessment of tax. We are still, as I say, liable to the payment of that interest but, under the Education Act, Chesterfield is reimbursed for the payment of its interest by the county council because the schools vest in the county council.
I want the Committee to realise that the county council, which reimburses Chesterfield for the amount of interest it pays, now has the power to levy a prescript on Chesterfield for educational purposes, and it gets from Chesterfield the money with which it reimburses Chesterfield for interest payments out of Chesterfield's rates. The actual cash position is not changed in any shape or form. Chesterfield pays its mortgage interest and is reimbursed by the county council, but, first, it pays a larger sum to the county council than that with which the county council reimburses it. I am prepared to admit that, in the reimbursement and the levying of the prescript by the county council, the identity of the actual cash is lost. Once cash is paid into a common fund its identity is lost. That does not alter the fact that the transfer of the schools from Chesterfield to the county council has not lightened the burden which Chesterfield has to pay for education, but it may


increase the burden it will have to pay in the way of Income Tax. I am not clear what the legal position is. The question of whether the right of set-off is allowable will not be cleared up until there has been a long series of actions.
Subsection (3) says in effect that the status quo shall not be altered.
Where any sum—has been or is to be reimbursed to a local authority by the Crown or by any other person.
We do not quarrel with regard to the Crown, but the reference to "any other person" includes a local authority, and my Amendment inserts "other than a local authority," in order that we can be certain that this right of set-off shall not be lost. It is an important matter for local authorities. The effect with regard to schools alone will cost Chesterfield a two penny rate. It is not only schools; there are police buildings. There are what are known as
"claimed" roads. We do not know the status quo at present because, suddenly, the Board of Inland Revenue appears to have changed its views. The "claimed roads." were transferred under the Act of 1929.Set-off has been allowed ever since 1930 and local authorities are still setting-off interest paid on the claimed roads against their profits, in spite of the fact that since 1930 they have been reimbursed by the County Council. Suddenly, the Board of Inland Revenue say, "No, you are not paying the interest because you are being reimbursed." The matter will have t be settled by a long series of local actions.
I suggest that it is very unwise to take away from a local authority services of which it is very, proud and then, by a mere side-wind, increase its liability to Income Tax.

Sir Waldron Smithers: Come over here.

Mr. Benson: This is not a very big matter from the point of view of the Revenue, but it may be a big matter from the point of view of the local authority. I want the Government to notice two things as far as the Inland Revenue is concerned. My Amendment does not lay any fresh burden. It merely asks that the Revenue shall not lay a fresh burden on the local authority, and, secondly, since all mortgages are subject to amortisation,

it only denies the Revenue temporarily a windfall which will ultimately fade out. It is in order to establish that position and to avoid the necessity of unfortunate litigation between the local authority and the Inland Revenue which is no good for anybody but lawyers, and not many of us have any sympathy with them. [Interruption.] I had forgotten the presence of the learned Solicitor-General who will reply to me and may I withdraw that remark. In order to avoid litigation and the laying of an entirely unjustified and accidental burden upon local authorities, I propose to insert these words and I hope that the Solicitor-General, if he cannot accept the actual phraseology will either accept the principle, or at any rate agree to look into the matter.

Mr. Eccles: When I first saw the Amendment on the Paper in the name of the hon. Member for Chesterfield (Mr. Benson) I thought it smelt of municipal trading but, on looking into it a little further, and certainly on hearing the very lucid arguments of the hon. Member, I think it is a good point, and I hope the learned Solicitor-General will answer it with sympathy.

The Solicitor-General: The Committee are indebted to my hon. Friend the Member for Chesterfield(Mr. Benson) for his very careful argument, which obviously requires equally careful consideration in reply. I am bound to say that I cannot help feeling that he proceeded on a complete misconception. What does Clause 19 set out to do? The position was that, under Rules 19 and 21 of the rules applicable to all Schedules of the Act of 1918, if a single individual was in receipt of income upon which he paid tax, and if out of that same income he paid interest to some other person, then, inasmuch as the income he received, and out of which he paid, had already borne tax, it should not again bear tax by having to be taxed in the hands of the recipient of the interest. That was the position before this Clause was drawn up.
What does this Clause do? It simply places local authorities in the same position as individuals. Hitherto local authorities have been at this disadvantage. They had to regard the various incomes which they received as separate incomes and, therefore, if they had to pay interest to some other person, they could not lump together the various


streams of income which they received and pay the interest out of that and retain the tax upon it in accordance with the principle which I indicated. But they had to separate their income, and if one stream of income was not enough to pay the interest, they had to bear tax on the excess of the interest for that particular stream of income. All that this Bill sets out to do, is to put local authorities into precisely the same position as the individual. The whole basis of the position as it existed, and as' it now exists, as affecting local authorities, is, that you must have an identity of income. You must have the same income being subjected to tax when it comes into the hands of the individual or local authority, as the case might be, and the interest paid out of that same fund.
The Amendment would involve a complete and absolute departure from that principle. What my hon. Friend is trying to say is that, even if a local authority does not pay interest out of its taxable income —by its taxable income, I mean the income it receives out of its undertakings —nevertheless, it shall still be entitled to retain tax on the interest that it pays out. If it pays that interest from some completely different source, namely, out of the sum paid to it by way of reimbursement from some out-side body, that is completely contrary to the theory and cannot possibly be sustained in any Bill.
8.0 p.m.
To what is the hon. Gentleman leading us? He is putting this position, that if an outside body reimburses the council, the council, although it does not pay interest out of its taxable income may, nevertheless, retain the tax on the interest although the interest is paid out of the sum it receives by way of reimbursement. If that view is accepted what is to happen when dealing with a reimburser who seeks to claim to retain tax in respect of the amount he pays to the local authority because he has paid that amount of his own taxed income? Clearly, the position must be that if the local authority seeks to retain the tax it must establish that it pays the interest out of its own taxed income. If a reimbursing authority, the county council, has taxed income —income which is subject to tax —and out of that income reimburses the borough council, the county council itself can also say,

"Inasmuch as we have paid that interest out of our taxed income, we ourselves are going to retain the tax upon it."
If the Amendment is adopted that second position becomes untenable, and the result will be that the revenue is deprived of the tax upon the interest it has paid. That, I submit, is a complete and absolute answer. The Amendment cannot possibly be accepted, because it runs counter to the theory on which Rules 19 and 21 were based, namely, that if you want to retain tax on the income you pay you must show that you have already paid tax in respect of that interest, because you have paid it out of income in respect of which you have paid tax. This Amendment involves a departure from that fundamental thesis.

Mr. Bracken: Perhaps the learned Solicitor-General could answer this point. Chesterfield has a magnificent educational record. Her schools are taken over by the county council and they have a liability for them. How can the Solicitor-General satisfy the argument, put forward in such an extremely capable way by the hon. Member for Chesterfield (Mr. Benson)? Chesterfield Borough Council had this responsibility and had no means of making themselves financially secure.

The Solicitor-General: It seems that my hon. Friend was under a misapprehension when he used the words he did, that the local authority had to pay more Income Tax and they were not being damnified in that respect. That is not the correct representation of the position. What is happening is this. Whereas. before they had to take their interest out of' their taxable income, and for that reason were allowed to retain the tax, the position now is that they no longer have to pay that interest at all because someone else is paying it for them. The county council is paying the interest for them, and reimbursing the amount they have to pay out on interest. Therefore, it is quite a reasonable thing that they should no longer derive the advantage they previously had of being allowed to retain the tax on that interest. My hon. Friend was saying that it is rather hard lines on the ratepayers. He was confusing the ratepayers with the two municipal bodies —the county council and the borough council. You have to regard this in terms


of the county council and borough council, and that is the effect of it. So far as the borough council is concerned, they can no longer retain the tax, but they are no longer under the obligation to pay; instead someone else is paying for them. The hon. Member shakes his head.

Mr. Bracken: No, the hon. Gentleman behind him is shaking his head.

Mr. Benson: What the learned Solicitor-General said is not correct. Chesterfield still has a mortgage on its rates, and it is Chesterfield's rates which are responsible for the payment of the interest to the people who loan the money. It is perfectly true that payment of interest, along with a large number of other expenses, is reimbursed by the county council, but the cash position is not altered in any shape or form inasmuch as Chesterfield will have to pay £3,500 a year more in Income Tax.

Mr. Bracken: . While I would not like to create any difficulties between the Members of the Party opposite, this is a substantial point, and I think that the Solicitor-General ought to address it as such.

The Solicitor-General: I am sorry that it is thought that I have not addressed myself to the immediate point. I listened with interest when my hon. Friend ventured to correct me. He said that they still have a mortgage, and will have to pay interest in respect of that mortgage, and, then, rather apologetically, he said it is true that they are reimbursed of that sum. That is exactly what I have been saying. What I have been saying is admittedly that they may have their mortgage, of course, they have; and in respect of that mortgage they are paying interest, and then I quote the passage which began with the rather shy words, "It is of course true" and that read "They are reimbursed the amount of that interest." They are reimbursed the amount, of interest by the county council, and if the county council reimburse them, if they have taxable income, it raises the same point; they can say, "We pay that interest out of our taxable income, and we want to be allowed to retain the tax on it." I am sorry that my hon. Friend thinks that I am not correctly representing the position. T listened carefully to him and I

am satisfied that what I have said takes place, namely, that they had to pay interest before and retained tax on it; they no longer pay it and cannot retain tax on it.

Mr. Charles Williams: I realise that there are complications between the local authorities, but I represent the taxpayers. I think that the Committee should know what this would actually cost in the way of revenue. Would it mean a surrender of any revenue? If it is merely a matter of book-keeping, I am not very interested one way or the other. But from the taxpayers' point of view, does it mean that if the Government accept the Amendment which was so skilfully put, we, as taxpayers, would have to find any more money? Can I have an answer to that?

Sir John Mellor: May I ask the Solicitor-General whether, in the circumstances described by the hon. Member for Chesterfield (Mr. Benson), and if this Clause were enacted, the revenue would gain?

Mr. Benson: If this is going to be the attitude of the Government, I do not wish to press the matter and, with the consent of the Committee, I will withdraw the Amendment.

Mr. C. Williams: I object to that. I am afraid that I am bound to object to the withdrawal of the Amendment. I think that we are entitled, when an Amendment is put forward seriously, and carefully argued by an hon. Member who has the respect of both sides of the House, to ask a very simple question, and have an answer as to what this will cost.

The Solicitor-General: I cannot give the figure because I do not know it. If this Amendment is accepted it may well mean, and, indeed, is bound to mean, that the Government will lose revenue. It is a practice which has never previously been put into operation and therefore, it is impossible to say what it would cost. But if it means that tax is going to be deducted from interest which is not paid out of taxed income every time £1 is paid in respect of that interest, it means the. Government loses 10s. and the longer that practice goes on the more the loss will be. Ultimately it will be very substantial. If it is accepted in the case of borough councils that this principle should be adopted, it may, with equal cogency. be


suggested that it should be adopted in the case of individuals. It would completely undermine and upset the whole basis on which the revenue authorities allowed tax to be retained in respect of income which had already paid tax, and the consequences one cannot foresee because they will be very far reaching.

Captain Crookshank: We have listened to this very interesting point, but when 1 saw the Amendment on the Paper I realised that it was a matter impossible for ordinary people to assess. The hon. Gentleman the Member for Chesterfield (Mr. Benson) has made what seems to be a powerful case, and the Solicitor-General has made an equally powerful case from the other side. Quite frankly, without my hon. and learned Friend on this Bench I am not in a position to assess the value of respective legal arguments, nor, so far as I am concerned, have I had any representations from my own local authorities. Therefore, it may be a Chesterfield point rather than a Great Britain point. I merely wanted to say to the hon. and learned Gentleman in charge of the Clause that if between now and the Report stage we find there is something we want to raise I hope he will not take exception to our doing so then.

Sir J. Mellor: I do not think it is only a Chesterfield point. I am grateful to the hon. Gentleman the Member for Chesterfield (Mr. Benson) for having drawn attention to if. I want to ask the Solicitor-General whether, if this Amendment is not accepted and the Clause is enacted in its present form, the Revenue is going to gain from the local authorities. 1 should like to get that answered first. It would be rather difficult to appreciate which local authority might gain and which might lose. What I want to know is whether the Revenue is going to get something out of it from somebody.

Mr. C. Williams: I think I must, out of courtesy, thank the hon. and learned Gentleman for the answer he gave me. I appreciate it very much. But I must express astonishment, because I have listened to Budget Debates for a fairly long while now and I have hardly ever come across a case in which the Treasury have no estimate of the cost. I am sorry to sec the Treasury reduced to such a state that they cannot give us any figure.

Lieut.-Commander Gurney Braithwaite: May I make a suggestion in the hope that

the Committee may be able to reach a compromise? It seems to me we have passed from the local sphere of the Debate to the financial sphere. The hon. and learned Gentleman said there is a substantial loss of revenue involved, but he did not know what the figure was. But the Minister should know. Cannot the Financial Secretary draw the necessary inspiration while I am speaking and come back and give us the figure, and then we could get on?

8.15 p.m.

Sir J. Mellor: May I—

The Chairman: The hon. Gentleman has made his point; he cannot go on indefinitely.

Sir J. Mellor: May I submit this, Mr. Chairman? I was not asking the question about the amount, but whether there would be a gain or not to the revenue if this Amendment is not accepted and the Clause enacted as it stands. I should have thought I was entitled to an answer to such a very simple question as that. There has been no attempt to answer it.

Amendment negatived.

Clause ordered to stand part of the Bill.

Clauses 20 and 21 ordered to stand part of the Bill.

Clause 22. —(Treatment of certain payments made under redundancy schemes.)

Motion made, and Question proposed, "That the Clause stand part of the Bill."

Sir Peter Bennett: On this Clause my hon. Friends and I had an Amendment down which has not been called, and I would like in a few words to explain the difficulty in which we find ourselves. This Clause has been inserted in connection with certain redundancy schemes. Under Section 25 of the Finance Act, 1935, certain taxation reliefs were granted under schemes which were initiated for eliminating redundant plants. These schemes have to be submitted to the Board of Trade and certificates granted before they are put into operation. A loophole has appeared and the Treasury have very rightly decided that it is not fair for a taxpayer to make payment to these redundancy schemes, if such payments are treated as charges liable for taxation, and then,


later, to receive them back as capital sums when they scrap certain plant, and receive compensation and charge it to capital. In that way they would have the best of both worlds. We quite agree. The Revenue authorities have drafted a scheme by which they provide various ways of preventing this. But we feel they have gone out of their way to make the scheme very complicated, whereas it might have been done in a very simple way under the existing law by using the 1945 Income Tax Act which provides that if plant or buildings are sold at more than the written down value the excess amount will be taxable. This applies similarly to buildings destroyed. We believe they had to hand a ready machinery for dealing with this subject, and that they have adopted a very complicated one instead.
It may be argued that people are used to dealing with complicated machinery in connection with Income Tax law, and that a little extra will make no difference. The trouble is that if people do not understand this they will not join these redundancy schemes. They will say "This is so much trouble and so complicated that I will not trouble about it. I will sell the surplus plant in the open market and then I shall get the result of the Income Tax Act, and I need not worry about this complicated machinery." If that happens, we have defeated the object for which these redundancy schemes were put into operation, because they were started so that plant which is not wanted shall be taken away, sterilised, scrapped, not used again. If a man says, "I shall not trouble because of the difficulties and complications," his plant will go into the market, and what was intended to be for the national interest will be lost. We think it is possible to achieve the desired object by a more favourable method. We agree that the 1935 scheme was too favourable, but we think this is too complicated. I should like a word from the Solicitor-General as to why this difficult scheme has been adopted, and why it cannot be done by a simpler method which would avoid the difficulty and danger which we foresee under the present scheme.

Sir Arnold Gridley: I am sorry that the Amendment on the Paper has not been called, and that we are now discussing the Question, "That the

Clause stand part of the Bill," because if I am rightly informed, my constituency is very much concerned in this matter. I refer to the cotton industry, which has been concentrated and has a redundancy scheme concerning spindles, and the same applies to the hatting industries, of which Stockport is a famous centre. Manufacturers in my constituency, under this very complicated Clause, do not know where they are. The sole object of the Amendment is to qualify and put in simpler terms what we understand the Government are anxious to achieve, and if that simpler method were adopted, we should get rid of Subsections (2), (3) and (4) of this Clause and also the fourth Schedule, which are infernally complicated, as so many of the provisions of these Finance Bills are. Surely we could simplify it without asking the Government to concede any financial advantage to industry in so doing? The objective of the Amendment was quite friendly, and purely for clarification and simplification. For that reason I should have thought that the Chancellor would have seen his way to give us what we want.

The Solicitor-General: I sympathise with the desire for simplicity. I accept at once the fact that the Clause and the Schedule do appear to be complicated at first sight. I fear it is quite unavoidable in the case of this financial Clause as it is in the case of so many other financial Clauses. Obviously, clarity and simplicity are highly desirable in so far as they can be obtained, but when one is dealing with a highly complicated subject in respect of which there has to be introduced a large number of qualifications, and provision made for a number of alternative sets of circumstances, it is often not possible to make the result easily and readily comprehensible at first sight. The hon. Member for Edgbaston (Sir P. Bennett) suggested that it might be a solution — since we are arguing upon the question "That the Clause stand part the Bill" and the Amendment has not been called —simply to leave "the law as it is, and leave the matter to fall to be dealt with under the provisions of the Income Tax Act, 1945. I gathered that the hon. Member for Stockport (Sir A. Gridley) rather assented to that view.
If it were left in that form there would, so far as I can see, be at least five fatal objections. It would take some time to


recount them and to indicate exactly what objections would be present but there would be live, at any rate. That may be taken as a measure of the difficulty of providing a Clause which introduces the necessary machinery to deal with the situation that arises. If I might deal with the suggestion to leave the matter to the 1945 Act, I would point out firstly that it does not provide for the position which arises before that Act comes into force. Any payment received between now and then would not be accountable to tax at all, because the operation of the 1945 Act does not, so far as these provisions are concerned, begin until April, 1946, so that anyone fortunate enough to receive payments up to then would not have to subject them to tax at all.
Another objection is that it would be grossly unfair to the taxpayer if it were left to the 1945 Act and for this reason: The Fourth Schedule to the present Bill is so drafted as to dissect the payment. By that I mean that when payment is received under the scheme, if the provisions of the present Bill are being applied, one has to see what part of the payment should fairly be brought in as a trading receipt, and one has to discard from that payment those portions which could not also have formed part of an allowance under the Income Tax Act. Under the terms of the Bill the taxpayer is only required to bring in the residue which properly could have formed an allowance under the Income Tax Act if it had been sought to set it up as a trading outgoing. If the matter is left to be dealt with under the 1945 Act, one is met with the serious objection that it is grossly unfair to the taxpayer, in that it results in the position that he is required to write off the payment against allowances which he is given under the 1945 Act and is required to submit to the balancing charge which is provided for in Section 3 and Section 17 of the 1945 Act, and he is obliged, in arriving at the figures of the cancelling out of the allowances and of the balancing charge, to bring in the whole of the compensation payment, whether It is a payment which might properly have been an allowance as a trading outgoing or not.
He will be placed in a position of great disadvantage. Suppose he receives £1,000 under the scheme set out by the Act. Suppose £500 of that sum represents the loss which he could have treated

as a trading outgoing in making up his accounts. It is provided under this Bill that the £1,000 is dissected, and in effect the person concerned is told, "You shall in any event only be called upon to bring into your trading accounts that 500, and as to the balance which under the Acts could not have formed the subject of a trading outgoing, we disregard that." If the 1945 Act is applied, the whole of that £1,000 has to be brought in wiping out the allowance that has been given year by year and by way of an initial allowance under that Act, and then the balance of the £1,000 has to be treated as a balancing charge which has to be submitted in the accounts as a charge on which tax has to be paid. That is a complete and fatal answer because it is grossly unfair to the taxpayer.
In some respects it would be equally unfair to the revenue, because the 1935 Finance Act says that contributions paid under a scheme are to be available as an outgoing in making up one's trading accounts.
8.30 p.m.
What we are trying to do is to see that, correspondingly, payments received under the scheme must be brought in as trading receipts. That being so, one has to dissect it. If you did not dissect it, it would lead to the Revenue finding itself in an unfair position because justice as between the taxpayer and the Revenue requires that the taxpayer should have to bring in at least so much of the payment, as is equivalent to the contributions which would be deductions when he paid them under the scheme. If you left it as under the 1945 Act, and if it transpired that there was an inequality between those two, you might have a position in which the allowances in the way of contributions were very substantial and at the same time the taxpayer was being allowed to treat as an outgoing too much of the receipt he gets from the scheme. I adduce those two points as being very nearly fatal objections to the proposal.
How do the Government, in the scheme as it is framed, attempt to deal with that situation? Admittedly in complicated language, and I regret as much as hon. Members the complicated language, but it is unavoidable. You get your £1,000 under the scheme. First we are going to say you must find out how much you, the trader, had been allowed to deduct in


your trading accounts by way of contributions paid under the scheme, and in respect of the whole of that account, in any event you have to submit to treating the payment you have received as a trading receipt. Then they say that that does not conclude the matter, because, having been fair to the Revenue, we want to make sure we are not unfair to the taxpayer and so we say in respect of the excess of the payment, supposing the contributions were £500, and the payments £1,000 we are going to apply this process of dissection. In regard to the excess of £500, how much can we call upon the taxpayer to bring in as a trading receipt? We are going to say he is liable to bring in as a trading receipt so much of the £500 as may be said to be a sum which might have been granted either in the 1945 Act or under the Income Tax law apart from the 1945 Act. Supposing that sum turns out to be £250, the net result is that the taxpayer is called upon to bring in £750 which I ask the Committee to say is a perfectly fair result, and although it is desirable to bring that about by simpler language, if one analyses the Clause, one finds that one cannot do that simply and provide for the contingencies that have to be taken into account in any other form. I ask the Committee to say that no reason has been shown to displace the Clause as it stands in the Bill.

Sir A. Gridley: I have listened with the closest attention to the reply of the learned Solicitor-General and I am sure his arguments are as clear to every other Member of the Committee as they are to me. All I can promise to do is tomorrow when I get HANSARD, to put a wet towel round my head and re-read what we have heard from the Solicitor-General. I thank him for the very great trouble he has taken in the explanation which I, if I had his intelligence, would have been able to follow more readily than I have been able t6 do. In the circumstances, I desire that the Clause stand part.

Question put, and agreed to.

Clause ordered to stand part of the Bill.

Clause 23 to 26 ordered to stand part of the Bill.

Clause 27.—(Reduction of rate of excess profits tax.)

Motion made, and Question proposed, "That the Clause stand part of the Bill."

Mr. Walter Fletcher: May I intervene with a point which I think will have the sympathy of everybody in the House? It refers to the great difficulty which I as a new Member, and I think many other Members, have in understanding some parts of this Bill. After the great day of the new era dawned at the beginning of July, we expected one of the benefits which would result would undoubtedly be that the clear light of Socialistic thought would translate itself into very simple language in every Act and Bill brought forward. The Chancellor, noted, I think, for his great simplicity and also for his sympathy with hon. Members on this side of the Committee, and for his vicarious generosity in respect of their incomes, might have devised something more easy to understand than this Clause.
I do not think that the stock objections to my asking for an explanation, which have come forward on nearly every occasion from the Government, apply on this occasion. I do not think that to ask for the information is running a risk of inflation or that hon. Members on the other side of the Committee have a mandate to put this Clause in a particular form.
So much for the dream, and now let us come to the business. I would like an explanation of what, in simple language, one with some intelligence like myself can understand this to mean:
(2) Notwithstanding anything in Subsection (2) of Section fifteen of the said Act, a deficiency of profits occurring in a chargeable accounting period to which Subsection (1) of this Section applies shall first be applied so as to reduce profits chargeable to tax arising in another chargeable accounting period to which the said Subsection (1) applies, and a deficiency of profits occurring in a chargeable accounting period to which the said Subsection (1) does not apply shall first be applied so as to reduce profits chargeable to tax arising in another chargeable accounting period to which the said Subsection (1) does not apply; and where owing to an insufficiency of profits against which the deficiency can be. set off for, chargeable accounting periods to which the said Subsection (1) applies or, as the case may be, does not apply, the whole or any part of a deficiency is applied otherwise than as aforesaid —
Thank goodness.

Mr. Mikardo: It is perfectly clear.

Mr. Fletcher: When I sit down, I shall await instruction from the other side of the Committee, where hon. Members ap-


pear to understand this. One of the benefits which I look forward to next April is a real attempt to put forward a Finance Bill that can be understood.

Mr. Glenvil Hall: I think the whole Committee will share with the hon. Member for Bury (Mr. W. Fletcher)the view that it would be nice, if that were possible, to try to get the language of these Bills a little simpler. The trouble is, that although we have got a Labour Government in office, they cannot do everything at once and we must look forward to a codification and simplification of our Income Tax law at some future time when, perhaps, the pressure of legislation is not quite what it is now. The explanation of the Subsection to which the hon. Member has referred is that the Excess Profits Tax has been levied both at the 100 per cent. rate and at the 60 per cent. rate, and it simply means that the deficiencies which come forward for rebate and for allowances should, first of all, have reference to the 60 per cent. rate, and then as and when that is exhausted, recourse can be had to the 100 per cent. rate. That is all that it means, no more and no less.

Question put, and agreed to.

Clause ordered to stand part of the Bill.

Clause 28. — (Relief not to be given for deficiencies of profits occurring after end of 1946.)

Sir H. Lucas-Tooth: On a point of Order. There are a number of Amendments on the Order Paper in the names of my hon. Friends and myself. I do not know whether it would be convenient for the Committee if you could give some guidance as to how the discussions should proceed. It is possible, of course, that some of the Amendments may not be called. There are two Amendments on this Clause 28 and there are a series of Amendments on Clause 38.

The Deputy-Chairman: I will take these two Amendments and call upon the hon. Member for Stockport (Sir A. Gridley).

Sir A. Gridley: I take it that these two Amendments can be discussed together?

The Deputy-Chairman: No, I am calling them separately.

Sir A. Gridley: I beg to move, in page 24, line 34, to leave out "forty-seven," and insert "forty-eight."
8.45 p.m.
The Chancellor has told us that it is his intention to reduce the rate of E.P.T. but not that he is going to abolish it. On the other hand, this Clause rules out relief for deficiency of profit after the end of 1946. E.P.T. as a tax may go on after that date. We may have the position arising which will be most unfair and unjustified, that the Chancellor of the Exchequer will get Excess Profits Tax after that date which would make no allowance whatever for any losses that may be sustained. I realise that the Chancellor of the Exchequer has in mind that a trader might quote unprofitable prices to get business because he had a "cushion" of E.P.T. to fall back upon, but in my view that is a very small risk for the Chancellor to take, and even if some firms did adopt that practice, it would result in increased employment and quite possibly an increase in our exports, and therefore the State and the Exchequer would benefit, or at any rate it would lose very little. I do not think that is a substantial argument for the Chancellor of the Exchequer to bring forward. As this Clause now stands, we are now almost in December. There is very little more than a year left for traders to complete their change-over arrangements from war to peace conditions and to get back to a normal trading basis.
There are a great many circumstances — and it is only necessary to point them out —which make it a practically impossible task to complete the change-over in so short a time. May I point out in parentheses that the Government themselves, in a recent Bill, demanded and secured the right to continue certain Measures for a period of five years when we on this side thought two years were ample. What are the circumstances which make it quite impossible for many industries to get back to a normal peace footing again? The first is obviously the lack of labour. Everybody knows that we are crying out today for a substantial increase in our labour force and we cannot get it, and we do not know when we shall. That is a very sound reason for assuming that it may be two years or three years from now before we get our labour force adequate, unless the present rate of demobilisation is very substantially speeded up. Then again men under 30 are being called up from our industries. That is going to create a gap in our labour force


which, if persisted in, will substantially increase our difficulties. How do we know —and this applies particularly to those industries which did exist in the great towns and cities and which have been so badly affected by the blitz —when they are going to get building licences to rebuild their factories at a time when there is such a tremendous demand for labour and where, in the case of these badly blitzed areas, town planning comes in? It may be a very long time before the plans for the rebuilding of these towns and cities are passed and approved by the various Government Departments and for which building licences will have to be granted to firms to re-site their premises quite possibly in another place altogether, hundreds of yards away or a mile or two away from where they existed before being destroyed by the enemy.
I ask the Committee to put this question to themselves. Do they think that in places like Bristol —my own native city, which was badly blitzed —Coventry, Plymouth and many others known to all Members of the Committee, those town planning schemes are going to be finished within the next 12 months? We are accustomed to hear in this House questions being put almost every day about delay in derequisitioning, of owners getting re-possession —and here Government Departments are the great offenders —questions as to whether those who own them are going within the next 12 months to get possession of them. Even then they may have a great deal of work to carry out, a great deal of re-equipping to do before they can get back to work again. I referred just now to industries which are being telescoped like the hatting industry and the cotton industry. In my constituency, and in many other places these firms are not de-concentrated yet. They are still going on in this concentration scheme and they do not know how much longer they may go on working in these conditions and it might be months yet before those firms which are now shut down will be allowed to re-open their premises. If we are to bring our factories up to date with the most modem equipment, they will have to be re-equipped. Is all that to be done between now and December, 1946?
Then there is one other argument I would submit. There are a great many customers of mine who in pre-war days

were very good customers. At the present time their premises are all smashed up, and it is going to take them a long time to get back to normal. Until they do I, and many others like me, will not be able to get back to pre-war conditions; we shall not know what tools and equipment we shall have to get to bring ourselves up to 100 per cent, efficiency and up to date in other respects.
These are just a few of the reasons which I could advance to show the probable difficulties —I put it no higher than that —with which a very large number of firms will be faced if all the time that they are going to get is just a little over one year. I recognise that there must be a time limit for the completion of the changeover, or some method of ascertaining when such changeover has, an fact, been completed, but I say that 12 months from now is a totally inadequate period in which to allow firms to bring into account costs which are going to be permitted under the refund of E.P.T., and to carry out all the work which falls within the categories which are permissible charges against E.P.T. I am making what I consider to be a most modest suggestion, namely, that we have one more year in which to complete the necessary work. In many cases I gravely doubt whether even that would suffice, but that is all I am asking. Therefore, I do not think anyone can say that it is an unreasonable request. It is because I think it is reasonable, and because I think the arguments I have put forward are unanswerable that I move this Amendment.

Sir P. Bennett: In a few words I wish to support the case put forward so ably by my hon. Friend the Member for Stockport (Sir A. Gridley). When this point was brought forward in the course of the Debate on the Budget Resolution, the Chancellor of the Exchequer was sympathetic with the principle; he said that he admitted there might be special cases and he would consider, without making any binding promises, whether he could find some way of meeting these special difficulties to which the hon. Member for Stockport has referred. So far, however, the kindness of his heart has remained locked to the rest of us; he no doubt has those kind thoughts, but they have not come forward in an Act of Parliament.
My constituents who are suffering do not quite know whether they will get


any special consideration or not. This point has been put very forcibly to us in order to remove any doubt: Could not there be a year longer, as the hon. Gentleman has suggested, in order to give the time that is really needed? The more one goes into it, the more certain it is that some of these very hard cases will be unable to get back to a profit earning state by the end of 1946. It is quite impossible to do it. Take, for instance, the blitzed firms. In my own city of Birmingham, which many people do not realise was probably the most heavily bombed city outside London —the death rate shows that —there is a great number of bombed-out business organisations. Some of these have been put by the Government into other people's premises and they have been able to make some Excess Profit. There is no hope of them being able to get back to a profitable basis by the end of 1946, because they arc in other people's premises; they are in makeshift shops, and it is absolutely impossible for them to be able to do it in time.
We feel that that is the sort of company which the Chancellor has promised to help, but for which he has found no scheme which would fit the case. If the position could be extended so that for another year they would be able to charge up the deficit against the Excess Profits which they have earned, it would help. I am not talking now about terminal losses, because the Financial Secretary in his speech on the Budget made it quite clear that he understood the difference between terminal losses and trading profits. I am not dealing with terminal losses. I am dealing with people who will not be able to get back to making a profit during the year 1947. I support the Amendment moved by my hon. Friend the Member for Stockport, and agree that this would be the way out of the difficulty.

Sir W. Smiles: I support this Amendment. I think it is a very moderate Amendment indeed, and I think my hon. Friend would have been wiser to put down "49" instead of "48" and then, perhaps, the Chancellor might have met him halfway and agreed to 48 and split the difference. The only business about which I am going to speak this evening is that of textiles. In Northern Ireland, when I was with the Ministry of Aircraft Production, I was responsible for taking

over many factories, turning out their old-established machinery and installing machinery which was necessary for the war. I could allude to one, a well-known spinning mill —the Barn Mills at Carrickfergus. All their spinning frames were turned out, and sewing machines were put in for sewing parachutes. A great many hon. Members in this Committee know the weight of a spinning frame; they know how difficult it is to move them and to re-erect them. At the present moment those Barn Mills are still on war contracts. The spinning frames have not been re-erected. There are in Northern Ireland many firms which are still carrying out war work and which have not even thought about returning to their peace-time occupations.
I crossed over on the aeroplane from Belfast on Monday morning with the chairman of one of the largest collar factories in the North of Ireland. He told me that he would not be able to do one bit of peacetime business before April, that he was still full up with war contracts and that he would be lucky to finish those before the end of March. I am informed that a great deal of unprocessed cloth is being exported abroad now, because the people who finish the cloth properly, who design it, dye it, bleach it and afterwards cut it up and embroider it for tablecloths, perhaps dress lengths and tropical clothes for' use abroad, have not been able to get started again. These manufacturers who have not started again will be diffident about taking these risks, and if they thought E.P.T. was to be continued for one more year they could afford to take some of these risks.
9.0 p.m.
A manufacturer exporting cloth, ordinary grey cloth, not properly finished, would be lucky to make 10 per cent. on the raw materials. If it is dyed and finished, or bleached, he should make 20 to 30 per cent. on the raw materials, and if he goes a bit further and cuts it up into finished tablecloths, ladies' dress lengths and things like that, he might easily make 60 per cent. on the raw materials. What we want to do is to encourage these manufacturers to take these risks again, in order to get the exchange from abroad, and to send out our exports in the highest possible form of finished goods, not half-made. As the hon. Member for Stockport (Sir A. Gridley) has said, we have also to


consider the blitzed premises. We did not have many air raids in Northern Ireland, but at Easter, 1941, we did have 1,000 people killed in about a week. At that time we lost our biggest factory, York Street, and our second biggest, Ewart's, and several others. Those firms have not got completely started again. As the Financial Secretary knows, Irish linen was one of our greatest exports to the United States of America, and if he wants dollar exchange he should get those firms up to prewar exports. It will certainly help them and not hinder them if he accepts this Amendment and alters 1947 to 1948.

Sir Frank Sanderson: I should like to put forward a point, which I raised on the Second Reading of the Finance Bill, relating to commodities which are under Government control and which manufacturers can purchase only through the Government Department and at a price fixed by the Government. We can foresee that when we come to the end of next year, i.e. 31st December, 1946, when Excess Profits Tax comes to an end, such industries may have large stocks of those commodities which have been purchased from Government Departments at a price fixed by the Government, and in the event of control of those commodities being removed industry could be faced with very serious losses. I have in mind a whole series of commodities of which I have given particulars to the Chancellor of the Exchequer and have also furnished him with a report. We should like, if we can, to have some assurance that it will be possible to offset the Excess Profits Tax which has been paid in subsequent years against the possible loss upon these commodities. I am aware that in the Second Reading Debate on 19th November the Financial Secretary did to a considerable extent cover the point which I am making, but what makes me a little nervous is that he said that in any event it would be possible next April to consider the position in the light of the Chancellor of the Exchequer's further experience during the next six months, i.e., between now and his next Budget.
I am an optimist, but who is there among us who can be certain that the present Government will be in office next April? [Laughter.] I say that in all sincerity. No one can be sure. It may

be that they will be in office, but surely it is not sufficient to ask us to accept a position which may be clarified during a Budget Debate which may or may not take place under the Government at present in office. I therefore think that we are justified an pressing the Government to make some Amendment to the Bill which would clarify and regularise the position. The Amendment of my hon. Friend would go a long way towards meeting the case which I have placed before the Financial Secretary to the Treasury, who gave it sympathetic support in his speech on the Second Reading. I would like to ask him if he will consider, between now and a later stage, drawing up a new Clause to cover the point which both he and I have in mind.

Mr. Glenvil Hall: I must ask the Committee to reject this Amendment. That is not to say that we do not see a good deal in the points that have been put to-night. I can assure hon. Gentlemen who have spoken that the Chancellor of the Exchequer will consider between now and next April what has been said. In telling the Committee that, I am doing no more than repeating what my right hon. Friend himself said in the earlier stages of the Debate on this particular part of the Budget.

Sir F. Sanderson: On that point, may I say that it was the statement made by the Financial Secretary on 19th November that gave me the necessary assurance?

Mr. Glenvil Hall: The assurance has been given twice, once, as the hon. Member has just said, by myself when I spoke on the Second Reading, and once by my right hon. Friend the Chancellor of the Exchequer when he was introducing the Budget Resolution on the subject.
Clause 28, to which this Amendment refers, implements the statement, made by the Chancellor of the Exchequer when he opened his Budget, that a period must be put to the time in which current profits in one particular accounting period can be set off against those of another accounting period within the same business. I think it is within the recollection of the Committee that he did say, with some support from hon. Members in all quarters of the Committee, that it would be unfair and unjust not to learn our lesson from the last war, when this relief was allowed to run on from year to year, and made


a very great difference in the end to the amount that came in as a result of the E.P.D. of that period. He said that this time it was the intention of the Government to try to prevent the same thing happening. He therefore introduced a time limit, and the time limit he gave was 31st December, 1946. He said it would be possible to look at the matter again, as there would be another Budget in six months' time, when we should know better where we stood than we do now. He said that hon. Members would have to wait until then, when we could look at the matter in the light of the experience of the intervening six months. He also said, as I reminded the House on the Second Reading Debate, that many of the losses to which reference has been made were terminal losses and were covered by other parts of this Bill. That being so and those being the reasons — which we think are good ones —I ask the Committee to reject this Amendment and let us pass on to the next.

Mr. Eccles: I think the Financial Secretary's reply is most unsatisfactory because, first of all, there is a great deal of difference between this postwar period and the last one. Surely he recognises that the difficulties that might arise in countless businesses as regards blitz, concentration and the manpower situation are realty very much greater than they were in 1919, and that it will take much longer this time to sort those things out because we have, to use a common expression, mobilised for total war in a sterner way. Why should we wait till next April to know whether we are going to have an extension? It is most disturbing to business, and I think the Financial Secretary has missed the main point. The point we are trying to make is that it is not fair for the tax to run on and the revenue to get the pluses of the profits and no longer for the trade to be able to set off the minuses of the losses. It is that unfairness which we object to. If the Financial Secretary would say here and now that E.P.T. was going to finish at the end of next year, there would be no complaints. In fact, when I heard the date of December, 1946, I assumed it was another of the Chancellor's tips —he gave us one about long-dated Government stock —and that we could count on E.P.T. being over by the end of next year.
One final point. I do not think it is a very good point to say that business

may use these losses and do things with them that will deprive the Treasury of revenue and, generally, do bad things such as under-cutting a competitor. Only on Monday last we heard the Government were going into business in the building industry with the taxpayers' money. That is exactly what the Government are going to do; they are going to use the taxpayers' money and compete with it. Why should not the ordinary business use its E.P.T. to build itself up, either at home or abroad, in the next year. I feel that we have had no satisfactory answer as to why we must be left in this uncertainty until next April.

Colonel Oliver Stanley: I appeal to the hon. Gentleman to add, if he can, to the statement he has made. It is agreed on all sides of the House, among people who take any interest at all in this point, that there is a possibility, at any rate, of a substantial grievance growing up. There is a great deal of common measure, and we all agree that we should not repeat the events of the last postwar period and should bring this to an end as soon as we can. Equally, everybody agreed that a reasonable period should be given to these firms to enable them to change over from wartime to peacetime operations before the period during which claims can be made is terminated.
9.15 p.m.
The only argument is on what is a reasonable period. I think all of us would agree that if times were normal and if every man running a business could be quite certain that he could get all the labour, materials and machinery he needed and had the energy to order during the coming year, probably a year would be sufficient; but that is not the case. We know quite well that there may be firms which, however energetic they are and however anxious they are to make the change-over in this period, will not be able to get the labour and materials necessary to enable the change-over to take place. Whether firms can complete the change-over in a year or cannot do so will not depend upon the energy or efficiency of their managements, but upon their geographical location, the length of time the war orders run on, the period at which they can begin to clear the decks for peace, the amount of structural alteration that was made when they were changed over to wartime work,


and the amount of blitzing they suffered. It will depend upon a variety of circumstances quite outside their control.
Frankly, I would not press this Amendment if the Financial Secretary had been able to go even as far as the Chancellor of the Exchequer went when we were discussing the Financial Resolution. On that occasion the Chancellor admitted that there was a grievance to be met. During this Debate the suggestion has been made that, if the Chancellor should find it impossible to Extend the period because it would mean extending it for all and not only for those who in fact need the extension, he might at any rate agree to some kind of machinery, some tribunal, for instance, to which those unable to complete the change over in a year could appeal, and that such people, if their special circumstances were proved, should be entitled to an extension. I am afraid that inevitably I am trespassing upon the remedy suggested in the next Amendment on the Order Paper, but it is impossible to separate the two. I should have been happy to have agreed to a proposal of that kind. I believe it would have been fair and would have covered the majority of cases. A month ago the Chancellor, without giving any pledge —I do not for one moment accuse him of a breach of faith —said that he would look into this matter and to see whether it was possible to do something upon those lines. In that month, with all the Treasury behind him, with the help of the draftsmen, if the Chancellor had seriously meant to meet the grievance, he could have had something on the Order Paper now. Not only has the Financial Secretary not gone farther than the Chancellor went a month ago —he does not seem even to have gone as far. In those circumstances, I can only advise my hon. Friends to go into the Division Lobby in favour of the Amendment, unless even at this last moment the Financial Secretary can give us some more definite assurance than he has done so far.

Mr. Cobb: We have just had six examples of aggressive vocal enterprise from six vital, aggressive enterprisers, and I want to deal with one or two of the points they have made. They have said that there is little risk' of this Excess Profits Tax payment being mis-

used. I say that in every company where there is an Excess Profits Tax cushion there is an atmosphere of inefficiency that goes right through the firm from top to bottom, and the sooner the Excess Profits Tax cushion is removed, the better it will be for enterprise and British industry It has been said that firms cannot complete the change-over in the period in question. It is time British industry learned how to do what its American associates can do — [Interruption.] Hon. Members opposite may laugh. American industry has shown us how to change over in four months. Hon. Members opposite want a year. It is far too long. It is about time that hon. Members opposite had some dynamite put behind them to make them get a move on. Finally, I want to say that one of the reasons why they want the period to be longer has only to be sought in the expensive restaurants in the fashionable parts of London where large parties are being held every night at the expense of E.P.T. The sooner it is removed, the better for the country.

Sir W. Wakefield: We cannot allow the statement made by the hon. Member opposite to go unchallenged. The hon. Member said that industry cannot turn over as it has done in America. Well, of course, industry cannot turn over —[Interruption.] Where is the labour? In the Services, not in industry. Hon. Members on this side have complaints of failure of hon. Members opposite to release from the Services the men urgently required in industry. Every day, hon. Members on this side have complaints of industrialists not being able to get raw materials, because of restrictions, controls and obstructions. That is why the turn over from war to peace does not go ahead. That is why our export trade is not being developed as it ought to be — [Interruption]. I want hon. Members opposite to hear this. I want them to realise that, if it was not for the obstruction by the Government, we would be beating America. When assistance is asked of the Chancellor of the Exchequer in order to help industry to get on with the job, we are denied it. Well, the results will be seen in a few months' time. The results will be seen in unemployment—

The Deputy-Chairman (Mr. Hubert Beaumont): I hope the hon. Member will deal with the Amendment on the Order Paper.

Sir W. Wakefield: I bow to your Ruling, Mr. Deputy-Chairman. I was carried away by the remark of the hon. Member opposite whom I was answering. The hon. Member was accusing hon. Members on this side of saying that British industry could not turn over from war to peace production and I say that, if that is allowed to go out to the world from this House of Commons, when the whole world is looking for our goods, it is not going to help our export trade.

Mr. Cobb: The statement was made by an hon. Gentleman over there, and I was paraphrasing it.

Sir W. Wakefield: It is a strange sort of paraphrase. I hope I have made this point, at any rate. Give industry the labour, give it the materials, give it the financial assistance for which we have

Division No. 33.]
AYES.
[9.25 p.m.


Adams, W. T. (Hammersmith, South)
Collick, P.
Grenfell, D. R.


Adamson, Mrs. J. L.
Collindridge, F.
Grey, C. F.


Allen, A. C. (Bosworth)
Collins, V. J.
Grierson, E.


Alien, Scholeneld (Crewe)
Colman, Miss G. M.
Griffiths, D. (Rother Valley)


Alpass, J. H.
Cook, T. F.
Griffiths, Rt. Hon. J. (Llanelly)


Anderson, A. (Motherwell)
Corbet, Mrs. F. K. (Camb'well, N.W.)
Gunter, Capt R. J.


Anderson, F. (Whitehaven)
Corlett, Dr. J.
Guy, W. H.


Attewell, H. C.
Corvedale, Viscount.
Haire, Fit.-Lieut. J (Wycombe)


Attlee, Rt. Hon. C. R.
Cove, W. G.
Hall, W. G. (Colne Valley)


Awbery, S. S.
Grossman, R. H. S.
Hamilton, Lieut.-Col. R.


Ayles, W. H.
Dailies, P.
Hannan, W. (Maryhill)


Ayrton Gould, Mrs. B.
Dalton, Rt. Hon. H.
Hardy, E. A.


Bacon, Miss A.
Davies, Edward (Burslem)
Hastings, Dr. Somerville


Baird, Capt. J.
Davies, Clement (Montgomery)
Henderson, A. (Kingswinford)


Balfour, A.
Davies, Ernest (Enfield)
Henderson, J. (Ardwick)


Barnes, Rt. Hon. A. J.
Davies, Harold (Leek)
Hobson, C. R.


Barstom, P. G.
Davie, Haydn (St. Pancras, S.W.)
Holman, P.


Barton, C.
Deer, G.
Hoy, J.


Battley, J. R.
Delargy, Captain H. J.
Hudson, J. H. (Ealing, W.)


Bechervaise, A. E.
Diamond, J.
Hughes, Hector (Aberdeen, N.)


Belcher, J. W.
Dobbie, W.
Hughes, Lt. H. D. (W'lhampton, W)


Benson, G.
Dodds, N. N.
Hynd, H. (Hackney, C.)


Berry, H.
Douglas, F. C. R.
Isaacs, Rt. Hon. G. A.


Bevan, Rt. Hon. A. (Ebbw Vale)
Driberg, T. E. N.
Janner, B.


Binns, J.
Dumpleton, C. W.
Jeger, Dr. S. W. (St. Pancras, S.E)


Blackburn, A. R.
Durbin, E. F. M.
Jones, J. H. (Bolton)


Blenkinsop, Capt. A.
Dye, S.
Jones, Maj. P. Asterley (Hitchin)


Boardman, H
Edelman, M.
Keenan, W.


Bottomley, A. G.
Edwards, John (Blackburn)
Kenyon, C.


Bowden, Flg.-Oflr. H. W.
Edwards, N (Caerphilly)
Key, C. W.


Bowles, F. G. (Nuneaton)
Edwards, W. J. (Whitechapel)
King, E. M.


Braddock, Mrs. E. M. (L'p'l, Exch'ge)
Evans, E (Lowestoft)
Kinghorn, Sqn.-Ldr. E


Braddock, T. (Mitcham)
Evans, S. N. (Wednesbury)
Kirby, B. V.


Brook, D. (Halifax)
Ewart, R.
Lang, G.


Brooks, T. J. (Rothwell)
Fairhurst, F.
Lavers, S.


Brown, George (Belper)
Farthing, W. J.
Lawson, Rt. Hon. J. J.


Brown, T. J. (Ince)
Fletcher, E. G. M. (Islington, E.)
Lee, F. (Hulme)


Bruce, Maj. D. W. T.
Foot, M. M.
Lee, Miss J. (Cannock)


Buchanan, G.
Forman, J. C.
Leslie, J. R.


Burden, T. W.
Foster, W. (Wigan)
Levy, B. W.


Burke, W. A.
Fraser, T. (Hamilton)
Lewis, J. (Bolton)


Butler, H. W. (Hackney, S.)
Freeman, Maj. J. (Watford)
Lewis, T. (Southampton)


Byers, Lt.-Col. F.
Freeman, P. (Newport)
Lindgren, G. S.


Callaghan, James
Gaitskell, H. T. N.
Lipson, D. L.


Champion, A. J.
Gallacher, W.
Little, Dr. J.


Chater, D.
George, Lady M. Lloyd (Anglesey)
Logan, D. G.


Chetwynd, Capt. G. R.
Gibson, C. W.
Longden, F.


Clitherow, R.
Gilzean, A.
Lyne, A. W.


Cluse, W. S.
Glanville, J. E. (Consett)
McAdam, W.


Cobb, F. A.
Gooch, E. G.
McAllister, G.


Cocks, F. S.
Goodrich, H. E.
McEntee, V. la T

asked, whether it is to help research or anything else, and we do not fear competition from America or anywhere else, but, if this assistance is not forthcoming, and this obstruction and these restrictions continue, then industry will not go ahead in the way in which we on this side. as well as hon. Members opposite, wish it to do.

Mr. Pritt: If the industrial position is as utterly hopeless as the hon. Member for St. Mary-lebone (Mr. Wakefield) describes, had he not better let people who understand how to run it get on with nationalisation?

Question put, "-That the word forty-seven stand part of the Clause."

The Committee divided: Ayes, 287; Noes, 135.

McGhee, H. G.
Poole, Major C. C. (Lichfield)
Thomas, I. O. (Wrekin)


Mack, J. D.
Popplewell, E.
Thomas, George (Cardiff)


McKay, J. (Wallsend)
Porter, G. (Leeds)
Thomson, Rt. Hon. G. R. (E'b'gh, E.)


Maclean, N. (Govan)
Pritt, D. N.
Thorneycroft. H.


MeLeavy, F.
Pryde, D. J.
Thurtle, E.


MacMillan, M. K.
Pursey, Cmdr. H.
Tiffany, S.


Macpherson, T. (Romford)
Ranger, J.
Tolley, L.


Mainwaring, W. H.
Rankin, J.
Tomlinson, Rt. Hon. G.


Mann, Mrs. J.
Rees-Williams, Lt.-Col. D. R.
Turner-Samuels, M.


Manning, C. (Camberwell, N.)
Reeves, J.
Ungoed-Thomas, Maj. L.


Marshall, F. (Brightside)
Reid, T. (Swindon)
Usborne, Henry


Mayhew, Maj. C. P.
Rhodes, H.
Vernon, Maj. W. F.


Medland, H. M.
Richards, R,
Viant, S. P.


Middleton, Mrs. U.
Robens, A.
Wadsworth, G.


Mikardo, Ian.
Roberts, Sqn.-Ldr. E. O. (Merioneth)
Walker, G. H.


Mitchison, Maj. G. R.
Roberts, G. O. (Caernarvonshire)
Wallace, G. D. (Chislehurst)


Monslow, W.
Robertson, J. J. (Berwick)
Wallace, H. W. (Walthamstow, E.)


Montague, F.
Rogers, G. H. R.
Watson, W. M.


Morgan, Dr. H. B.
Royle, C.
Webb, M. (Bradford, C.)


Morris, Lt.-Col. H. (Sheffield, C.)
Scott-Elliot, W.
Weitzman, D.


Morris, P. (Swansea, W.)
Sharp, Lt.-Col. G. M.
Wells, P. L. (Faversham)


Morris, Hopkin (Carmarthen)
Shurmer, P.
Wells, Maj. W. T. (Walsall)


Mori, D. L.
Silkin, Rt. Hon. L.
Whiteley, Rt. Hon. W.


Moyle, A.
Silverman, J. (Erdington)
Whittaker, J. E.


Murray, J. D.
Silverman, S. S. (Nelson)
Wilcock, Group-Capt. C. A. B.


Nally, W.
Simmons, C. J
Wilkins, W. A.


Neal, H. (Claycross)
Skeffington, A. M.
Willey, F. T. (Sunderland)


Nichol, Mrs. M. E. (Bradford, N.)
Skinnard, F. W.
Willey, O. G. (Cleveland)


Nicholls, H. R. (Stratford)
Smith, Capt. C. (Colchester)
Williams, D. J. (Neath)


Noel-Baker,. Capt. F. E. (Brentford)
Smith, Ellis (Stoke)
Williams, Rt. Hon. E. J. (Ogmore)


Noel-Buxton, Lady
Smith, Norman (Nottingham, S.)
Williams, J. L. (Kelvingrove)


Oldfteld, W. H.
Smith, T. (Normanton)
Williams, Rt. Hon. T. (Don Valley)


Oliver, G. H.
Snow, Capt. J. W.
Williamson, T.


Orbach, M.
Solley, L. J.
Willis, E.


Paget, R. T
Sorensen, R. W.
Wills, Mrs. E. A.


Paling, Rt. Hon. Wilfred (Wentworth)
Soskice, Maj. Sir F.
Wilson, J. H.


Paling, Will T. (Dewsbury)
Stamford, W.
Wise, Maj. F. J.


Palmer, A. M. F.
Stewart, Capt. M. (Fulham)
Woodburn, A.


Pargiter, G. A.
Strachey, J.
Wyatt, Maj W.


Parkin, Fit.-Lieut. B. T.
Stross, Dr. B.
Yates, V. F.


Paton, Mrs. F. (Rushcliffe)
Stubbs, A. E.
Young, Sir R. (Newton)


Paton, J. (Norwich)
Swingler, Capt. S.
Younger, Maj. Hon. K. G.


Peart, Capt. T. F.
Symonds, Maj. A. L.



Perrins, W.
Taylor, H. B. (Mansfield)
TELLERS FOR THE AYES:


Piratin, P.
Taylor, R. J. (Morpeth)
Mr. Mathers and Mr. Pearson.


Platts-Mills, J. F. F.
Taylor, Dr. S. (Barnet)





NOSE.


Aitken, Hon. M.
Gage, Lt.-Col. C.
McKie, J. H. (Galloway)


Allen, Lt.-Col. Sir W. (Armagh)
Galbraith, Cmdr. T. D.
Maclean, Brig. F. H. R. (Lancaster)


Amory, Lt.-Col. D. H.
Gates, Maj. E. E.
MacLeod, Capt. J.


Assheton, Rt. Hon. P.
Glossop, C. W. H.
Macmillan, Rt. Hon. Harold


Baldwin, A. E.
Gomme-Duncan, Col. A. G.
Macpherson, Maj. N. (Dumfries)


Barlow, Sir J.
Gridley, Sir A.
Manningham-Buller, R. E.


Beamish, Maj. T. V. H.
Grimston, R. V.
Marlowe, A. A. H.


Bennett, Sir P.
Hannon, Sir P. (Moseley)
Marples, Capt. A. E.


Birch, Lt.-Col. Nigel
Hare, Lt.-Col. Hon. J. H. (W'dbridge)
Marshall, Comdr. D. (Bodmin)


Boothby, R.
Harvey, Air-Cmdre. A. V.
Maude, J. C.


Bower, N.
Haughton, Maj. S. G.
Mellor, Sir J.


Boyd-Carpenter, Mai. J. A.
Headlam, Lt.-Col. Rt. Hon. Sir G.
Molson, A. H. E.


Braithwaite, Lt.-Comdr. J. G.
Hinchingbrooke, Viscount
Morrison, Rt. Hon. W. S. (Cirencester)


Buchan-Hepburn, P. G. T.
Hogg, Hon. Q.
Mott-Radelyffe, Maj. C. E.


Carson, E.
Hollis, Sqn.-Ldr. M. C.
Neven-Spence, Major Sir B.


Clarke, Col. R. S.
Holmes, Sir J. Stanley
Nicholson, G.


Cooper-Key, Maj. E. M.
Hope, Lt.-Col, Lord J.
Noble, Comdr. A. H. P.


Corbett, Lieut. Col. U. (Ludlow)
Howard, Hon. A.
Nutting, Anthony


Crookshank, Capt. Rt. Hon. H. F. C.
Hulbert, Wing-Comdr. N. J.
Osborne, C.


Crosthwaite Eyre, Col. O. E.
Hurd, A.
Peto, Brig. C. H. M.


Crowder, Capt. J. F. E.
Hutchison, Lt.-Cdr. Clark (Edin'gh, W.)
Pitman, I. J.


Cuthbert, W. N.
Jarvis, Sir J.
Poole, Col. O. B. S. (Oswestry)


Darling, Sir W. Y.
Jeffreys, General Sir G.
Price-White, Lt.-Col. D.


Davidson, Viscountess
Joynson-Hicks, Lt.-Cdr. Hon. L. W.
Prior-Palmer, Brig. O.


Digby, Maj. S. Wingfield
Keeling, E. H.
Raikes, H. V.


Dodds-Parker, Col. A. D.
Kingsmill, Ll.-Col. W. H.
Reid, Rt. Hon. J. S. C. (Hillhead)


Conner, Sqn.-Ldr. P. W.
Lambert, G.
Renton, Maj. D.


Dower, Lt.-Col. A. V. G. (Penrith)
Lancaster, Col. C. G.
Roberts, Ma]. P. G. (Ecclesall)


Drayson, Capt. G. B.
Law, Rt. Hon. R. K.
Robinson, Wing-Comdr. Roland


Drewe, C.
Legge-Bourke, Maj. E. A. H.
Ropner, Col. L.


Duthie, W. S.
Lindsay, Lt.-Col. M. (Solihull)
Ross, Sir R.


Eccles, D. M.
Linstead, H. N.
Sanderson, Sir F.


Erroll, Col. F. J.
Lloyd, Maj. Guy (Renfrew, E.)
Scott, Lord W.


Fletcher, W. (Bury)
Lloyd, Brig. J. S. B. (Wirral)
Shephard, S. (Newark)


Foster, J. G. (Northwich)
Lucas, Major Sir J.
Smiles, Lt.-Col. Sir W.


Fraser, Maj. H. C. P. (Stone)
Lucas-Tooth, Sir H.
Smith, E. P. (Ashford)


Fraser, Lt.-Col. Sir 1. (Lonsdale)
Mackeson, Lt.-Col. H. R.
Snadden, W. M.







Spearman, A. C. M.
Thornton-Kemsley, Col. C. N.
White, Sir D. (Fareham)


Spence, Maj. H. R.
Thorp, Lt.-Col. R. A. F.
White, Maj. J. B. (Canterbury)


Stanley, Col. Rt. Hon. 0.
Touche, G. C.
Williams, C. (Torquay)


Stoddart-Scolt, Col. M.
Vane, Lt.-Col. W. M. T.
Williams, Lt.-Cdr. G. W. (T'nbr'ge)


Sutcliffe, H.
Wakefield, Sir W. W.
Winterton, Rt. Hon. Earl


Taylor, C. S. (Eastbourne)
Walker-Smith, Lt.-Col. D.
Young, Maj. Sir A. S. L. (Parlick)


Teeling, Flt.-Lieut. W.
Ward, Hon. G. R.



Thomas, J. P. L. (Hereford)
Watt, Sir G. S. Harvie
TELLERS FOR THE NOES


Thorneycroft, G. E. (Monmoulh)
Wheatley, Lt.-Col. M. J.
Commander Agnew and Mr. Studholme.

Sir H. Lucas-Tooth: I beg to move, in page 24, line 34, at end, insert:
Provided that this subsection shall not apply to any deficiency of profits occurring in any chargeable accounting period beginning on or after the said first day of January, nineteen hundred and forty-seven, which is attributable wholly or partly to' expenditure or loss incurred by reason of, or consequential upon, circumstances arising in any chargeable accounting period beginning before the said first day of January, nineteen hundred and forty-seven (which expenditure or loss is hereinafter referred to as 'a terminal loss') to the extent that any such deficiency is so attributable.
For the purpose of this subsection, but without prejudice to the generality of the foregoing, a terminal loss shall include—

"(a) any expenditure incurred on repairs and renewals which were due to be made but could not be carried out before the said first day of January, nineteen hundred and forty-seven;
"(b) any expenditure incurred in the process of rehabilitation from war-time production to peace-time production." 
On the Report stage of the Budget Resolutions some of us on this side raised the question of deficiencies, and I asked for a definition of what deficiencies the Government were proposing to stop allowing for set-off against previously paid tax. At that time the Chancellor of the Exchequer in his reply showed some sympathy for the proposals and arguments which were put forward from this side of the House. I think that this is a fair statement of his reply: he said that he would give consideration to the continuance of relief in certain special types of case, and he emphasised the word "special." On the Second Reading of the Finance Bill, the Financial Secretary to the Treasury came back on rather a different line. He said that there appeared to be some confusion on this side of the House between deficiencies and terminal losses.
So far as I am aware the expression "terminal loss" is quite a loose one. If there is confusion on this subject it is because the Government have so far refrained from enlightening us as to what they mean by "terminal loss," which they are prepared to consider for special

treatment. The Financial Secretary, referred to four classes of terminal loss, and suggested that they would be covered by the existing law, or, at any rate, the law as it will be when this Bill becomes an Act. I assume that the existing law to which he referred is the Finance Act, 1940, Section 33 (2). That is the Section which allows certain expenditure to be spread back, instead of having to bring it into the account for the year in which it is actually expended. It may be spread back so as to be attributed for purposes of Excess Profits Tax to previous years in which the tax has been levied. I have examined that Section very carefully since the hon. Gentleman directed the attention of the House to it, and it seems to me that, so far as that Section is concerned, such expenditure will only be affected so long as the Excess Profits Tax scheme continues in being. I will not read the Section, which is a fairly long one, but I think it is clear from the first lint: that it is contemplated that it will operate only so long as there is in fact an excess profits scheme.
I do not know whether it is the Government's intention that that Section shall continue to operate indefinitely. I rather gather that that may be so. It is extremely important to know whether the Government do or do not intend to continue that scheme indefinitely. I hope we shall have some statement from the Govt. this evening to tell us what they intend. I have put down a new Clause for the express purpose of clarifying that point. I do not know whether it. is intended to call that Clause or not, but it would be appropriate if the Chancellor or the Financial Secretary could say something as to that when replying to the Debate. It deals with the class of case which clearly falls within the meaning of terminal loss, but it would be misleading the Committee to suggest that that Clause covers terminal losses of the kind which have been referred to this evening. They go much further than that, and it is in order to cover this wider kind of terminal


loss that I have put down the Amendment which is now under discussion.
I do not suggest that the wording of this Amendment is perfect. This is not the kind of Amendment which it is very easy for a private Member to draft and put upon the Order Paper, when we have seen examples of the sort of thing required to bring this sort of machinery into operation. But it is drafted to the best of my ability so as to show to those who read it what is intended. It is deliberately drafted widely in order that we shall be able to get a statement from the Government as to whether, in fact, a wide range of expenditure would be included within this type of case. The kind of question which it is fair to ask the Government tonight is, How widely do they intend to allow certain of these deficiencies to rank for set off next year, how widely are they prepared to go, or, if they are not prepared to do it by some such means as this, by what means do they intend to carry out what they have suggested? The Financial Secretary, in the course of his speech on the Second Reading, included in terminal losses the cost incurred in the rehabilitation of industry to peace-time conditions. That was wide expression. It is clear from his speech that it is intended that that particular class of loss shall be continued. It is certainly not continued under Section 33 (2) of the Finance Act, and I can find nowhere in this Bill anything which gives relief in, respect of that kind of payment. Therefore, I ask the Government if they will say whether they intend that Section 33 (2) shall continue to apply, and whether they will consider the kind of special case which is included in this Amendment? If they will not consider so wide an Amendment as this, will they say what machinery they intend to apply in order to carry out the intentions which have already been announced?

9.45 p.m.

Mr. Glenvil Hall: This Amendment follows closely that which we have just discussed and voted on, and therefore many of the points I might have made have already been covered either by my-self or other speakers on the preceding Amendment. I do not intend to weary the Committee with the same arguments again. What the hon. Member for South

Hendon (Sir H. Lucas-Tooth) wants to do is to add something to Clause 28 (1). Clause 28, as we all know from previous discussions, provides that no relief shall be given in respect of deficiencies of profit accruing after the end of 1946. There has been some criticism and complaint of that and what the hon. Member wants to do now is to bring in two special types of deficiencies, which can go on and count beyond the end of next year. One of the things he wants to bring in is the question of repairs and renewals due to be made, but which could not be carried out before the 1st January, 1947. Actually these repairs and renewals are already covered and there is no need to cover them again.

Sir H. Lucas-Tooth: I think I am right in saying that they will only be covered if we get a firm assurance that Section 3 (2) of the Finance Act, 1940, is to continue in effect.

Mr. Glenvil Hall: They are now being covered, and if the hon. Member wishes me to add "provisionally," I will do so, because perhaps that is nearer to the facts of the case than the bald way in which I put it. They are covered now and the question arises whether they will be continued. An assurance has been given that terminal losses of all kinds will be dealt with at the proper time, and as the Chancellor said in his Budget speech, and as I made clear in my Second Reading speech, where you get borderline cases which may be considered as terminal losses, something will be done to ensure that they are carried over and dated back to E.P.T. as terminal losses. Into the same category comes the second type of expenditure to which the hon. Member referred, namely, the rehabilitation of war-time production. That is also covered like a terminal loss, and therefore it seems to me that the two objects to which this Amendment is directed are both covered, either provisionally or definitely. The Committee have, in addition, the assurance of my right hon. Friend the Chancellor of the Exchequer that terminal losses will be looked at afresh in the interests of justice and fair play to industry, so that fair play can be given to industry generally, and I think the Committee will agree that nothing could be fairer than that.

Mr. Godfrey Nicholson: Will it be possible to specify, and put down in black and white, the arrangements which may be made in this direction, or will it be left to the firms in question, and the Inland Revenue?

Mr. Glenvil Hall: It is very difficult for me to answer that question offhand. I would say, generally, that obviously it would be very inexpedient that points of this kind should be left for a bargain to be struck between the Inland Revenue and the individual trader. Certain principles have to be laid down, of course, and as far as the Income Tax law is concerned, up to now it has been pretty accurately laid down, and I hope that will continue.

Mr.. Nicholson: In effect, that means that possibly by next April, a fairly specific series of rules may be produced?

Mr. Glenvil Hall: Not necessarily. It is only three or four months since the war against Japan ended, and industry is now in process of turning back to a peace time basis, and it is early yet to say or to know what will happen. We shall have another Budget in about four or five months' time. By then the situation will be much clearer than it is today, and discussion then can take place in the light of the situation that will exist as to what should or should not be done in the months ahead.

Sir H. Lucas-Tooth: In view of the Financial Secretary's reply, I beg to ask leave to withdraw the Amendment.

Amendment, by leave, withdrawn.

Clause ordered to stand part of the Bill.

Clauses 29 to 37 ordered to stand part of the Bill.

Clause 38.—(Undertakings and authorities which must be given.)

Mr. Walter Fletcher: I beg to move, in Page 33, line 3, leave out "directly or indirectly."
I think we all realise that these Clauses, which relate to E.P.T. refunds, represent part of the Chancellor's great desire to help trade and industry in postwar reconstruction. I do not think anybody is quarrelling with that intention in any way at all. I believe, however, that in this Clause the words "directly or indirectly"

may lead to the frustration of what the right hon. Gentleman is trying to do. These words have very often led to misunderstanding, litigation, and confusion in the past, and at this time, when we all want to devote ourselves to getting on with the job, those are very unprofitable forms of endeavour. So that we may understand these Clauses I will try to draw an analogy which will make them fairly clear. During the war, at the request of the previous Government, we were all asked to use only five inches of water in our baths. These proposals are as if the Government were to come along now and say "The water situation is a little better. You may have another three inches of water, but you must make sure you use it specifically for ablutionary purposes which will be laid down and which are in the public interest in every way; and you must see to it that the three inches of water in no circumstances mix with the other five inches"—that is the five inches to which we were limited by the previous Government which was not so keen on inspection as this one. I believe it would be just as difficult, and will prove just as difficult, to implement all the strings tied to this Clause as it would have been to see that the five inches and three inches of water never got mixed up.
On this particular Clause, I believe that the effect of using the words "directly or indirectly" can be this. Any firm or company which over a number of years has created a reserve fund, may in any year on receiving a refund of E.P.T., take money from that fund, or, if earned in the ordinary way, may wish to pay it out. The words "directly or indirectly" can be construed to prevent them from so doing. I do not believe that that is the Chancellor's intention in any way. His intention is clear. He wishes this fund, which is for the purpose of re-equiping industry, not to be used for any other purpose. If he puts in, as he does here the words
"directly or indirectly" they extend ad infinitum the range of what he can forbid, and to some extent it makes the rest of this Clause nonsense, because once you have used the word ''indirectly" the question expands in such a way that nobody can see its end. I suggest, therefore, that unless he can reassure me and my hon. Friends who have put their names to this Amendment, he


should take out those words ''directly or indirectly," because I believe they have exactly the opposite effect to that which he desires.

Mr. I. J. Pitman: I would like to raise a point that is covered by this question of "directly or indirectly," particularly in regard to capitalisation. I would like from the Chancellor some information on this question of capitalisation of bonus shares, because bonus shares are not necessarily a means of extracting money out of a company; in fact, there is a very good case for saying that money cannot be extracted in that situation. Let me say at once that I, personally, am in complete agreement with the intention behind these proposals. But if we do capitalise the refunds in this connection, then we have in perpetuity, sterilised them so that they cannot be paid out in cash to anybody, because we then have the whole of the auditing profession and the ordinary book keeping procedure automatically stopping that particular amount of money going out. I would like to know whether the Chancellor has considered this particular aspect. It seems a pity to throw away what is one of the most easy and most effective permanent ways of stopping that money going out, in the manner in which we do not desire it to go.

Colonel Oliver Stanley: I hope the Chancellor will be able to give us some explanation of this point. I confess that the Clause as it is worded seems difficult to understand. We know exactly what is the Chancellor's intention, and we all agree with it. This money is intended to be used for capital purposes, and not to be devoted to dividends, but it appears to me that on a strict reading the Clause, as now drafted, would mean that once a company received this repayment, even though it used the repayment for capital purposes, if at any time after that it ever distributed something by way of dividend, it might be said that, indirectly, that dividend had been due to this capital repayment, and that therefore an offence would have been committed. Suppose they receive £50,000 and the whole of that money is spent in buying new machinery. In the first place it might be said that if they had not received this £50,000 they would have had to take the money out of their profits for the year and therefore their dividend ought to be reduced to that

extent. Secondly, if as a result of the installation of this new machinery there is an increase in their production, their profits the next year increase, and they distribute an increased dividend, it might be said that that is indirectly due to the machinery installed as a result of the money received from this source. If we really pursue the full range of definitions of the word "indirectly" it seems to me that we shall get into an accounting morass.

10.0 p.m.

Mr. Dalton: The difficulty here, of course, is to find a simple form of words which will convey a meaning that can be made to suit a number of rather different cases. I think the practical clue is to be found in the advisory panel which we propose to set up, a panel of persons of good business experience, including accountants, and so on. I could not accept this Amendment, because to do so would open the door wide to abuse. I do not say that the hon. Gentleman who moved it favoured these abuses. The Amendment is a natural peg on which to hang a Debate and to seek for elucidation, but to accept the Amendment would open the door very wide to all sorts of abuses, which as the right hon. and gallant Member for West Bristol (Colonel Stanley) has said, we do not want. It would make it easy to do a switch between two funds, to use a fund which before this scheme came into operation was primarily destined for re-equipment for dividend distributions, which is not what any of us would agree should happen. If the word "indirectly" was out that, of course, would be legal. On the other hand, I agree that the Clause as it stands is wide —it was deliberately widely drawn —but I hope that in practice no unfairness or unreasonable interpretation will arise, because it is to deal with such cases that this advisory panel is being set up. The panel will no doubt begin by handling certain initial cases, and as a result of that certain rules and practice will be followed in the light of their expert consideration of the problems of re-conversion as they come along. I hope that will be a sufficient assurance at this stage —the whole thing can be kept under review as we move on —for the hon. Member to be content, having raised the matter, not to press his Amendment.
The advisory panel will be instructed to take a broad view. I said at an earlier stage of these discussions that I did not want to interpret "re-equipment" with unreasonable strictness. It was the right hon. and gallant Member for Gainsborough (Capt. Crookshank) who raised the point and asked whether re-equipment would include re-establishment of working capital and so on, and I said, "Yes, certainly." The word "development" was queried, and I was asked whether we interpreted it narrowly or broadly. I said that we would interpret it reasonably broadly, subject to the advice and guidance of the advisory panel. The advisory panel is the administrative key to this difficulty, I think. It is really impossible to get words in a Clause of this sort which will give us an assurance against abuse on the one hand and, on the other hand, give a perfectly clear statement in advance of how things will operate.
The complexities, and the variations of conditions between the different firms are such that I think we must leave it to administrative common sense, exercised through the people whom we shall appoint with this special function to perform. I hope that the hon. Member will feel that my statement has been sufficiently reassuring against any possibility of harsh or unreasonable treatment and that he will now withdraw his Amendment.

Mr. W. Fletcher: Can we have the terms of reference of that panel?

Mr. Dalton: They are not drawn yet. There is no desire to conceal them.

Mr. Fletcher: In drawing them, will attention be drawn to cases such as I have pointed out?

Mr. Dalton: Yes.

Mr. Fletcher: I feel confident that the Minister's statement will be read by the people concerned. I therefore beg to ask leave to withdraw the Amendment.

Mr. Dalton: I have no desire to hold anything back about this. We will go into the matter in due time.

Amendment, by leave, withdrawn.

Sir Wavell Wakefield: I-beg to move, in page 33, line 41, at the end, to add:

and shall lapse at the end of such five-year period.
Subsection (4), as drafted, makes a postwar refund binding on all persons who, at any time within five years after the surrender date of the undertaking, carry on a business. From that it would appear that if there is a change in personnel after the five-year period, the undertaking lapses, but if there is no such change and there is continuity, the Subsection may be read to mean that the undertaking would apply indefinitely to the person who gave the under taking. It is suggested that the addition of the proposed words at the end of the Subsection would clarify the point. I hope that the Chancellor of the Exchequer will see his way to agree to the addition of the words.

Mr. Dalton: The hon. Gentleman need not be apprehensive about this matter. We are dealing with a transitional state of affairs and with a change-over from war to peace. We all hope that all the arrangements we are discussing now will terminate within a reasonable time. On the other hand, I doubt whether it is really wise to implant into the Bill at this stage, the wording that the hon. Member proposes. I shall be quite prepared so long as I hold my present office to look reasonably at these matters, but it is difficult at this stage to say just how long it will be necessary to get the turnover. There is no intention to linger on indefinitely. If we desired to bring about the result which would follow from permanent limitation, this would not be the way to do it. The proper way would be by a permanent Clause of a rather different character in some future Finance Bill. I have taken note of the hon. Gentleman's apprehensions and we shall bear them very much in mind, but I should be sorry to introduce words into the Clause at this stage. I should rather hope that we could leave it at this and keep the matter under review as we go forward.

Sir W. Wakefield: Is there not an anomaly as it stands now? If, after five years, a business is sold, the undertaking lapses automatically, but if after five years you carry on the business, the undertaking remains, and that seems to be rather an anomalous position. Might I hope that it will be investigated?

Mr. Dalton: I will look at the matter. I would rather not take these words tonight.

Sir W. Wakefield: In view of what the Chancellor of the Exchequer has said I beg to ask leave to withdraw the Amendment.

Amendment, by leave, withdrawn.

Sir P. Bennett: I beg to move, in page 33, line 41, at end, add:
(5) Any person who has given such undertaking may submit proof to the Commissioners of Inland Revenue that a sum not less that the net amount of the refund has been expended by him since the seventh day of April nineteen hundred and forty-one in the purchase of equipment or alteration or re-equipment of premises for the purpose of the trade, in the purchase of trading and non-trade stock, or in the discharge of liabilities previously incurred for such purposes or otherwise for the purposes of the business and on the acceptance of such proof by the Commissioners which must be given or refused within three months of the submission thereof the undertaking will be satisfied and no further claim can be made on that person with, regard to the net refund under the next two succeeding sections.
Provided that any such person may from time to time submit proof that expenditure for the above mentioned objects or any of them has been incurred in respect of a sum less than the amount of the post-war refund and on acceptance of such proof by the Commissioners the undertaking will be satisfied in respect of this sum.
This Amendment is an attempt to clarify the Clause as at present worded, particularly as the words "directly or indirectly" remain, and leave taxpayers in some uncertainty. Taxpayers may consider they have made an expenditure to which refund may properly apply, but there is always a doubt as to whether that attitude will be taken by the Treasury. We feel that they may be challenged at any time within the five-year period, and that, in effect, this may be held to constitute a contingent liability. The Amendment suggests simple machinery by which this can be avoided, and any doubts in the taxpayer's mind relieved. It does it, as you will see in two stages. First, the whole of the amount can be cleared up, and, secondly, it can be done in stages. The taxpayer can come along from time to time, and show part of the expenditure and get that cleared, and can complete the lot by stages. That is the general intention.
The Amendment also deals with one or two particular points which I brought forward in the Debate on the Budget Resolutions when the Chancellor said he agreed that restocking would be one of the purposes for which the refund might be used. It will be remembered, perhaps, by the Treasury that when the right hon. Gentleman the Member for the Scottish Universities (Sir J. Anderson) was Chancellor of the Exchequer, I put forward a question, which concerned many firms who had already started on their reconstruction and were actually taking over plant in Government factories, which they were converting and refitting for civil purposes. We had a direct assurance from the late Chancellor that expenditure which was then being incurred —before any definite decision such as that given by the present Chancellor was made—would be allowed when the time came for these credits to be repaid. Those are the points we have introduced into this Amendment. We have put the date as 7th April, 1941, which was, of course, the date when the late Sir Kingsley Wood first mentioned the question of repayment at a later date. We appreciate and agree with the statement made by the la Chancellor, by Sir Kingsley Wood and by the present Chancellor that the object of all these precautions is to prevent credits being used or dissipated in the form of dividends. We entirely agree with what the Chancellor said and the method he has adopted, but we suggest that the Amendment provides a simple way whereby the industrialist who is carrying out work for which the credit was granted may be able to obtain a clear certificate and finish the job, and not have the feeling hanging over him for five years that a question may be raised by the Treasury as to whether he is dealing with it in exactly the way the Treasury intended.

10.15 P.m.

Mr. Dalton: The Amendment moved by the hon. Member for Edgbaston (Sir P. Bennett) is reasonable in principle and intention. As I have already said, I confirm the pledge that was given by my predecessor on this subject. In referring to the question whether firms could go on developing with an assurance that the refunds would cover past expenditure within a reasonable period, my predecessor said:
I can give an unqualified answer in the affirmative. If a firm draws on 'its reserves


or gets an overdraft in order to carry out development for post-war purposes "— 
and that is important —
the fact that the obligation in connection with the development may be incurred now, that is to say, before Parliament has decided on the, terms of this legislation, will not in any way prejudice the firm concerned. It is important that that assurance should be given, because it is in the general interest that development should be undertaken as soon as it is physically possible.
I hope and believe that in the more enterprising concerns in this country, like the firm for which the hon. Member for Edgbaston is responsible, that has been going on, and we do not want to do anything that will slow up that development. Much less do I wish to go back on my predecessor's undertaking. The exact words of the Amendment will not quite do, for various reasons which I need not go into now, because I am prepared to undertake myself to put down on the Report Stage words which will, I think, carry out reasonably what the hon. Member has asked for.

Mr. Eccles: The Amendment which the right hon. Gentleman proposes to put down on the Report stage will carry out the undertaking given by the late Chancellor of the Exchequer, which referred to capital expenditure for post-war purposes. There is a class of capital expenditure which would be covered, I believe, by the words of the Amendment now before the Committee, and I want to ask the Chancellor a question on the subject. I will give two instances. In the Rhodesian copper industry, at the insistence of the Government, the copper mines carried out very extensive capital works during the war in order that every ton of copper might be produced. To. do that they spent money which they could not obtain from existing reserves. They had no profits out of which to pay dividends during the war because, in the national interest, they spent everything they made on capital works. Is it not fair that mines of this kind should be able to set off against expenditure which was made simply at the insistence of the Government the Excess Profits Tax refund which they might get?
There is another example of the same sort. The Chancellor will know that Excess Profits Tax has fallen very heavily on large progressive farmers. Some farmers have made a profit a very large

part of which has gone in Excess Profits Tax, but notwithstanding the fact that the balance left to them has been very small, they have developed their land and carried out large capital works very often at the instigation of the county agricultural committees. I know where a man has spent £15,000 of capital expenditure more than the whole of the net profit he received during the war. Is it not fair that a farmer who has to do that in order to keep up full production, and who has been patriotic in that way, should be allowed, if he has an E.P.T. refund coming to him, to set it off against capital expenditure already incurred and approved by the county war agricultural committee?

Mr. Dalton: I will be very glad to have a look at this. I must ask for notice, but as regards the two particular cases mentioned, I will certainly have a look at them.

Mr. Nicholson: Is not the moral of the whole thing how the money is spent, rather than how it is not spent?

Mr. Dalton: I am not sure it is as easy as that, and if I were to lay it down in that way, I might be charged with being unduly restrictive. I will give it careful consideration, in view of what has been said by the Mover of the Amendment. It might be better to say that it should not be spent in a limited number of ways, than to say how it should be spent. I will go into the matter again and endeavour to find words that will meet with general agreement.

Sir W. Wakefield: I would like to ask the Chancellor a few questions, but I do not expect answers now. Can the principal company of a group of companies supply part of its own refund in developing the business of a subsidiary? Can it use the refund of one subsidiary, to develop the business of another subsidiary? Can it use the refund of a subsidiary to develop its own business? Those are the three main points which I should like to have looked into. One further question. Does development include financing of stock, debtors and initial losses in new trade and in export? Would development include the improvement of the liquid position of an otherwise insolvent company? I do not know whether these points are understood.

Mr. Dalton: They will be noted in the Official Report and I will have a look at them.

Sir P. Bennett: On behalf of my hon. Friends and myself I should like to thank the Chancellor for the way in which he has received the Amendment and for the promise he has given. I am quite sure he appreciates our point of view, and realises that anything that he can do to remove uncertainty and give a feeling of solidarity in helping to finish the job, will help industrialists and help the national interest. I beg to ask leave to withdraw the Amendment.

Amendment, by leave, withdrawn.

Motion made, and Question proposed, "That the Clause stand part of the Bill."

Sir H. Lucas-Tooth: There is a question that I think should be considered if the Chancellor is proposing to redraft this Clause, and that is the propriety of excluding from the new scheme the creation of bonus shares. It is difficult to deal with this subject in the abstract, and perhaps the best way is to take a concrete example. Let us take the case of a company with £100,000 fully paid capital. Suppose that company receives an E.P.T. payment of £20,000. I am assuming that the £100,000 capital is precisely balanced by £100,000 worth of assets, which is a very simple case though it is none the worse for that. After receiving this £20,000, that money will duly be spent on some proper purpose, such, for example, as the purchase of machinery, and on the company's balance-sheet you will then have assets to the value of £120,000. On the other side of the balance-sheet you will have only the capital, the £100,000.

Hon. Members: Order.

The Temporary Chairman (Mr. Douglas): I think the hon. Member is now going far beyond the scope of the Clause.

Sir H. Lucas-Tooth: I think, if I may develop my argument, it will be clear—

The Temporary Chairman: I really do not think that this comes within the scope of this Clause.

Sir H. Lucas-Tooth: I am only going to suggest that the proper way of dealing with a case of this kind is to allow this sum of money to be dealt with by the creation of bonus shares—

The Temporary Chairman: The hon. Gentleman is not in Order. This has nothing to do with the purpose of this Clause.

Captain Crookshank: Surely my hon. Friend is not completely out of Order, in view of the words which appear in Subsection (1,b):
shall not be directly or indirectly distributed by way of dividend or cash bonus or capitalised for the purpose of issuing bonus shares or debentures …
He was only amplifying the meaning of those words.

The Temporary Chairman: As I understand it, the hon. Gentleman was making quite another point, that after the money has been expended on some specific assets, bonus shares may be created, and I thought that was going beyond the scope of the Clause.

Captain Crookshank: In view of the words "directly or indirectly" which stand in the Clause, are not the hon. Member's references in Order?

Sir W. Wakefield: Further to that point of Order, was not the hon. "Member making the point that by issuing these bonus shares the company would be completely complying with what the Chancellor of the Exchequer wanted, namely, fixing an asset there permanently?

Sir H. Lucas-Tooth: The hon. Member for St. Marylebone (Sir W. Wakefield) has anticipated one of my arguments. It is precisely to that effect. It is that in order to carry out the Chancellor's intention, it would be very much better if he permitted the issue of bonus shares which are expressly precluded now in paragraph (b), and I submit, in that respect, that on the question whether this Clause should stand part, and particularly in view of the fact that the Chancellor has said he will recast the Clause, it is in Order.
In the case of the company to which I was referring, we had got to the point where, on the right-hand side of the balance sheet are assets valued at £120,000, and we have to find entries for the left-hand side of the balance sheet to balance them. As far as I can see, there are only three ways in which that can be done. The first and obvious way as simply to show the figure of £20,000 as


balance of profit and loss account. Of course, if that is done, it will be open to the company at any moment to apply the money standing to that account for the purpose of a dividend. The only thing that precludes them from doing so would he the existence of the undertaking given. As soon as that undertaking goes, then it will be open to the company to distribute this money by way of dividend, and that is the one thing which, on both sides of the Committee, we want to stop. The second way in which this sum can be balanced is by a figure for a reserve. Again it would be perfectly open to the company, apart from the undertaking, to transfer the amount from that reserve and Lo apply it for dividend. The third way of dealing with this —and I submit with great respect the proper way of dealing with this; sum of money —is to capitalise it, to apply it as capital of the company. Then, by the normal process of the law, that money cannot be distributed in cash, because under the Companies Act, the company cannot repay capital to its shareholders without the sanction of the court. So that if the Chancellor wants to carry out the purpose on which we are all agreed, then much the most effective way of doing it is not to preclude a company from capitalising this money, but indeed to see that it does capitalise it and that it does so as quickly as possible.
For this reason I submit it is wrong to preclude the capitalisation of these sums. On the contrary, companies should be encouraged to do so, and, if I may say so, to add a controversial note at the end, I am not at all sure that the prohibition against capitalising this money is not derived from the unfortunate expression, "bonus shares," which has frightened the right hon. Gentleman into thinking that a result of what he is trying to do, might not be agreeable to his own supporters. I do not know. I am only speculating, but I do ask him to reconsider this Clause and to ensure that the genuine purpose which we all desire to be carried out should be carried out in the most effective way possible.

10.30 p.m.

Mr. Dalton: I think it would be convenient if I replied now. There are certain limits to what I am prepared to do. I am not prepared to stultify this Clause and this condition. What was it Sir

Kingsley Wood said when he made provision to deal with this evasion? He said that we desired this refund to be for the development and re-equipment of industry and not to be distributed for the benefit of shareholders whether by the payment of dividends, by the issue of bonus shares or debentures, or by any other means whatsoever. I am not going back on that broad principle. I have given certain undertakings in respect of certain speeches from the other side, to look into various matters arising here. But the general structure of this Clause must stand, and the general prohibitions must stand. The undertaking that I gave had nothing to do with bonus shares. It has to do with development work undertaken by active enterprising firms in a period of doubt. We desire to remove that doubt, and the undertaking I gave has nothing to do with bonus shares. The hon. Gentleman is now asking for a little more than I am prepared to concede. We might have a long discussion about bonus shares, about when it was reasonable to issue them and when not, but, broadly speaking, this Clause means the prohibitive use of this refund for this purpose, and to that position I must adhere. I do not want any misunderstanding about that.

Mr. Pitman: May I raise some other points? I sympathise and agree entirely with the Chancellor of the Exchequer's objectives, but what I would like to know is whether we may see the draft of the prescribed undertaking which companies have got to give. Will the Chancellor bear in mind that there is a great deal in what has been said on this subject of bonus shares? I guarantee to give the Chancellor an example of a bonus share issue which he would regard as highly proper. I think we want to know whether any concern would be required to give an undertaking not to pay in such and such a quite proper way and then go to the panel to be allowed to break that undertaking. This is something which we should be quite clear about, because it is a little difficult.
The other point I want to be assured about is whether he cannot make some distinction between fixed assets and current assets and fixed liabilities and current liabilities. It also does seem to me that the words "used" and "dealt with" in (a) are in need of more inter-


pretations. The question of a farm has been mentioned, and if the money is used in the purchase of a cow and the cow calves so advantageously that the money comes back has the refund been
"dealt with"? I think that guidance in such cases is a point that wants to be borne in mind. Finally, what I would like to know is if the right hon. Gentleman has had any experience to show that this scheme is likely to work. He had an instance of the same sort of thing over the administration to see that money borrowed is not used for insurance premiums. I would like to ask him whether he has from that previous experience found it is practicable to put your finger on a particular sixpence of a number of other sixpences and say how the particular one has been spent.

Sir J. Stanley Holmes: The Clause says- that a person who has received an Excess Profits Tax refund must give an undertaking, first, that
the net amount of the refund will be used in developing or re-equipping the trade or business, and until so used will be so dealt with as to remain available for use when required for developing or re-equipping the trade or business.
I want to ask the Chancellor what is to happen in the case of a retail tradesman, say a butcher or a grocer, who has paid during the war, the suitable amounts of Excess Profits Tax. He has no opportunity of spending his money by way of mechanical equipment. He can possibly treat his shop in an extravagant way, but after that there is nothing more that he can do with the money, and he is called upon to hold it in his business. Similarly placed is a merchant in London or Liverpool, or any other city. He has an office, and buys from abroad and sells here, or buys here to sell abroad. He has no equipment and no capital expenditure. He has paid heavy Excess Profits Tax during the war, and there is nothing on which he can spend the money. What is to happen to it? Has he to hold that money and invest it in national funds? Or what is he to do with it?

Mr. Dalton: There is no desire to keep the refund for ever. That would be absurd. This is one of the cases where firms must make their own propositions, and the decisions rest with them. That is where the panels will, I hope, as I said

earlier, lay down fairly general rules. We certainly would not freeze, or take any such action. I myself could look, with the advisory panel, into cases where there was doubt.

Question put, and agreed to.

Clause ordered to stand part of the Bill.

Clause 39 ordered to stand part of the Bill.

Clause 40.—(Establishment and duties of advisory panel and referee.)

Motion made, and Question proposed, "That the Clause stand part of the Bill."

Captain Crookshank: I think the Chancellor of the Exchequer is right when he says that the advisory panel is the key to the whole problem. Therefore it seems to me that it would be just as well if the Chancellor could tell us a little more about his ideas on the advisory panel, because all that the Bill says is the opening words in Clause 40 (IA). There is no Schedule or anything indicating the kind of persons to be appointed. It only says there will be an advisory panel of such persons as the Treasury think fit. It is the Chancellor's own selection —that is what is meant by "a person the Treasury think fit" —and a referee. We should be obliged if the Chancellor would expand a little and tell us what kind of person he has in mind, and also tell us about the referee. This is going to be a rather strange and unusual panel. They have not only this function over the general field about which so little is known, but if one looks at Subsection (3) of the. Clause, one finds they have a duty laid upon them "in such cases and at such times as they think fit" to make certain inquiries. It is entirely up to them, therefore, to inquire what happens to this money. They cannot be compelled by anybody to investigate unless they wish to, and, on the other hand, no sum which has been mis-applied can be recoverable unless the advisory panel has so reported. It is probably the right sort of function for the advisory panel. I suppose they would get some indication something had gone wrong in a particular set of circumstances, and they themselves would investigate it.
That function seems to me to be much in contrast with another function which they have. They have to act in an enormous number of cases, probably without


any option at all, where the whole or any part of the refund is not paid to the person who originally carried on the business, or is not to be used for the purpose of the original trade or there has been any change in the persons by whom the trade is carried on. Even the death of one person can affect it. It seems to me the panel will have much to do, with the many changes, and the vast number of persons and undertakings which have been concerned with E.P.T. during all these years. The death of one partner has to be investigated and reported on, without the panel having any possibility of doing otherwise, because all this is laid in the statute Is that really the intention? If so the panel will have to be something enormous, if it is to deal with this possibly great mass of problems, coming up within a very short time. I hope the right hon. Gentleman will let us know something about that, and is it really necessary that this sort of thing has to be approved in every case by the advisory panel? They cannot approve the undertakings unless they are satisfied with regard to certain things in the second part of the Clause. That I do not think is so difficult. It is the change in the persons in the first part that worries me, when I reflect how wide is the field covered by the Excess Profits Tax over this long period of years.
As I read it the second function cast upon them is purely at their own volition, and not in the least mandatory. I think that is probably the right way, but I am not sure it is the only way with which you can deal with this problem. So long as you get a panel of experienced persons in whom all concerned can have confidence and a referee to whom there lies an appeal under Subsection (4) of the Clause, then I do not think this Committee will be doing anything very wrong in passing the Clause. But I should like the right hon. Gentleman to explain how he thinks the panel of any reasonable size is going to deal with all these varied persons; so that, if we think fit, we could put in words at the next stage to indicate more clearly the kind of person who ought to be on it.

10.45 p.m.

Mr. Dalton: I am very glad to respond to the request of the right hon. and gallant Gentleman. We have to feel our way. Nobody can make a cut and dried

scheme. It can develop and as experience accumulates improvement can be suggested. The intention is that this panel shall consist of persons of business experience. It should not be difficult to find people who are broadly acceptable in the light of their experience, including, in particular, some commercial accountants and people with experience of that sort, on account of the relationship which an accountant bears to a business concern. These are the kind of people we have in mind. The experience of such people and the application of common sense, rather than rigid, tightly drawn rules, will see us through most of the difficulties.
There may be a vast number of cases —we cannot tell. We have to test the thing by experience. I hope that a lot of them will be susceptible to precedent after a time. One or two broad rules would be laid down, and these would be made known and firms who might be in difficulties about knowing whether this or that was legitimate would be able to say, "In such and such a case the panel thought that this was all right." There will doubtless be Questions in the House, and it will gradually become clear that some things are all right and some are not all right. Therefore, I hope that although a number of individual firms will have problems that will not mean the same number of references to the panel. I hope that the various problems will fall conveniently into groups and that one case will govern others.
As to referees, there are people who have had experience in appeals arising out of tax legislation. That is the sort of person of whom I am thinking, but I have not a fixed mind on this. I am open to suggestions from any hon. Member in any part of the Committee who has experience and ideas upon the subject. Broadly, I would say that the referee should be a man who has had experience in regard to appeals in matters relating to tax legislation generally. A lot of these cases will never, in fact, go to the panel at all. Very often the thing will be cleared up between the Inland Revenue and the firm concerned. On the other hand, if there is a case in which it is felt that the panel could serve a useful purpose, in which there is some particular, exceptional aspect or one of special and wide importance to a lot of firms, I would hope


that the panel would have a look at it. My mind is quite flexible on all this. Clearly, We must have some special body to do this work, and we will compose it to the best of our ability, so as to command general confidence —the confidence of the Government and of business. In that way we hope to get along in dealing with this awkward problem. It is not a case for strict predetermined rules. We must see how we go. I am anxious to get something that will work with the maximum of acceptance, and with the minimum of bureaucracy.

Captain Crookshank: I am much obliged. The right hon. Gentleman has been most forthcoming. I agree that there might not be many cases to go to the panel but I ask the Chancellor to look at Subsection (2), under which it is mandatory that no refund shall be paid, unless the panel approves. That means that every single case has to go to the panel automatically.

Mr. Dalton: Yes, but it might be purely formal. It might be nothing more than a rubber stamp. We will look at the point, but I am not going to jump into any inelastic commitments about the matter, nor I am sure would anybody wish me to do so. We will look at it. It might well be that the panel would be clearly of opinion, or the Inland Revenue might advise the panel, that certain things fell into broad categories and that it was not necessary to have a special session of the panel, as those things could be handled on broad lines in the light of precedent.

Captain Crookshank: I am sorry to come back to the point, but there could not be any parallel case where it is a matter of the personnel concerned.

Mr. Dalton: I will look into it.

Mr. Nicholson: Surely these questions could be the subject of commonsense discussions. I think the right hon. Gentleman will defeat his own ends if he makes a point of having somebody of legal experience as referee. My experience is that the legal profession will not want to act in this capacity and that he should choose people like accountants, of wide commercial experience.

Question put, and agreed to.

Clause ordered to stand part of the Bill.

CLAUSE 41.—(Income Tax on postwar refunds.)

Motion made, and Question proposed, "That the Clause stand part of the Bill."

Mr. Pitman: Owing to the shortage of accountants, the difficulty of working out promptly the E.P.T. refunds will be very great. The suggestion made in the Budget Resolution Debate was that there might be some dishonestly conducted businesses where it was desired to delay refund, but that investigation may show that they have not been dishonestly conducted, and for a variety of reasons many people might find themselves getting refunds very much later than other people. In the reverse direction of Death Duties, the time taken to settle the estate does not work against the Chancellor, the ultimate recipient of the duty. He receives interest from the estate for the time taken to clear it up. Cannot something of that kind be done in this case? I ask the Chancellor to consider this proposal very carefully.

The Solicitor-General: I do not think I can add to what has already been said in answer to the hon. Gentleman. He raised precisely the same point when we were discussing the Resolution.

Mr. Pitman: I should like to read to the Solicitor-General exactly what he said on that occasion, which was that the Revenue authorities naturally wanted to get their hands at the earliest possible moment on what was due to them and that it was in the interests of the authorities to get things clear as soon as possible. His statement is the exact reverse of the situation, and it is because the Solicitor-General took my point in the exactly opposite way that I have raised it again. The Inland Revenue here in this case are sitting on the taxpayers' money, just as in the case of Death Duties the executors are sitting on the State's money. Surely in neither case ought practical necessities of delay diminish the ultimate benefit to the people concerned.

The Solicitor-General: The Inland Revenue authorities have an interest in getting their hands on what the are entitled to have, but they have an equally strong interest in getting all outstanding


matters cleared up at the earliest possible moment. I cannot add to what I said before, and that is that they act as fast as they can. They do not like leaving matters outstanding for no reason, and they will now, as always, deal with these problems as expeditiously as they can according to the circumstances in each case. That is all I can say in reply to the remarks of the hon. Gentleman.

Question put, and agreed to.

Clause ordered to stand part of the Bill.

Clauses 42 to 45 ordered to stand part of the Bill.

Clause 46.—(Payment of refunds out of Consolidated Fund.)

Sir A. Gridley: I beg to move, in page 39, line 38, at the end, insert:
Provided that sub-paragraph 2 (a) of paragraph 1 of Part II of the Seventh Schedule to the Finance (No. 2) Act, 1939 (which prohibits the inclusion in capital for the purposes of the Excess Profits Tax of sums contributed out of the Consolidated Fund) shall not apply to any sums paid on account of post-war refunds.
The Treasury have contended that under the War Damage Acts payments derived from moneys provided by Parliament should be excluded from Excess Profits Tax. Surely, that is most unjust. The words of the Act were intended to refer to fixed assets, but they have been stretched to cover cash compensation for war damage. This is an example of the difficulties that arise when laws are not drafted clearly. The purpose of this Amendment is to make it impossible for a 'similar misunderstanding to arise in respect of Excess Profits Tax refunds.>

Mr. Dalton: I accept this Amendment, which is a reasonable one, but I must give a warning that I must look at the wording of the Amendment, and I may want to make a slight alteration to it on the Report Stage. I do not quarrel with the purpose of the Amendment, and I agree with the hon. Member's arguments.

Amendment agreed to.

Clause, as amended, ordered to stand part of the Bill.

Clauses 47 to 57 ordered to stand part of the Bill.

CLAUSE 58.—(Appointment of Collectors of Taxes, etc., for City of London.)

Motion made, and Question proposed, "That the Clause stand part of the Bill."

11.0 p.m.

Captain Crookshank: This Clause raises the question of the Collectors of Taxes for the City of London. This is one of the problems which exercised the Treasury to my knowledge for very many years, and if the present Chancellor and the present Financial Secretary have been able to reach a happy conclusion of this matter, they are very much to be congratulated. It is for that reason that I rise to ask whether all parties are satisfied with the compensation arrangements which are part of this Clause. If these have been satisfactorily settled with those concerned, then certainly the right hon. Gentleman is to be congratulated.

Mr. Glenvil Hall: I can give the right hon. and gallant Gentleman that assurance —all parties now have at long last come to agreement in this matter and it will now be implemented in this Bill.

Mr. C. Williams: If after this long interval there has been an agreement, I think someone on the Treasury Bench who knows something about it should tell the Committee what it is all about. May we not have this explanation? I have no wish to detain the Committee, but this is a matter of great interest to me and to others, and to let it go through without explanation is not right. Quite frankly I can conceive that the Government, having come to this agreement, might not be willing to enlighten the Committee as to what it is all about. They might not wish us to be able to tell our constituents what the Government had done.

Mr. Glenvil Hall: Briefly the City of London has come into line with the rest of the country so far as the taking over of the Collectors of Taxes is concerned. Previously the City of London stood out. It was felt by them then that they would prefer to go on on their own, like a lone wolf. Certain changes have since occurred and the have now, on their own initiative, desired to come into line. From now onwards, from the time this agreement is implemented, they will fall into line with the rest of the Tax Staffs throughout the country and will not, in


future, go on in the old way. Compensation has to be paid and that has been agreed. I do not want to detain the Committee. But I think that what I have said does give the Committee all that the Committee may, at this stage, require to know. If however the hon. Member for Torquay(Mr. C. Williams) would like to see the full agreement I shall be very happy to meet him tomorrow and we can go through the whole thing together and he can enlighten himself to the fullest extent.

Mr. C. Williams: I must thank the Financial Secretary. There is no need for him to meet me tomorrow. I shall not keep him until then, but I would like to say that I am very glad that he has given this explanation. I understand that the statement he has made has the entire good will of the City of London and that this proposal has nothing to do with the incompetence of the Government.

Question put, and agreed to.

Clause ordered to stand part of the Bill.

Clauses 59 and 60 ordered to stand part of the Bill.

The Parliamentary Secretary to the Treasury (Mr. Whiteley): I beg to move, "That the Chairman do report Progress, and ask leave to sit again."

Question put, and agreed to.

Committee report Progress; to sit again Tomorrow.

SENTENCED SOLDIERS (AMNESTY)

Motion made, and Question proposed, "That this House do now adjourn."— [Mr. Mathers.]

11.5 p.m.

Captain Baird: I apologise for keeping the House at this late hour, but I feel strongly on this matter and I think it is worthy of discussion. It is a very important matter. I wish to appeal for an amnesty for those soldiers who were sentenced during the war for refusal to carry out an order under fire, or what is, I believe, technically termed desertion in face of the enemy. I speak of this matter with some knowledge because during the autumn and winter of last year, while with the Second Army, I was obliged to attend as an officer numerous courts-martial in

Holland and Belgium. Further, in the spring of this year, in my capacity as a dental officer, I had to visit detention camps in Belgium on many occasions. The first point I want to make is that the technical charge of deserting in the face of the enemy does not really mean desertion in the way we usually understand this term. The fact that a soldier refuses to go forward under fire, even though he does not run away, technically means desertion in the face of the enemy.
There are one or two points I would like to raise about the general conditions under which these young men were sentenced. In this war young soldiers were forced to face a barrage such as no other men have had to face in the history of the world. I speak from my own slight knowledge and many other soldiers have agreed with me on this point. Then, in this war there has not been trench warfare such as was known in the last war. There was not the same cover in this war.

Brigadier Prior-Palmer: Were you there?

Captain Baird: I was there.

An Hon. Member: You were not.

Mr. McKie: On a point of Order. Is it in Order for an hon. Member to say of a Member opposite, "Take him out; he is drunk"?

Earl Winterton: It was said by a Member next to the speaker, the hon. and learned Member for North Hammersmith (Mr. Pritt), and I challenge him to repeat what he said across the Floor of the House.

Mr. McKie: I clearly heard the words, and that has been reinforced by what the noble Lord said. He said "Take him out if he is drunk."

Mr. Deputy-Speaker (Major Milner): If that was said —I did not hear it —it must be withdrawn at once.

Captain Baird: The numerous courts- martial I had to attend were almost similar to this extent, that almost all the cases that came before us—

Mr. Deputy-Speaker: If the hon. Member made the remarks attributed to him, he must be good enough to withdraw forthwith. If he did not make those remarks, perhaps he will state that fact.

Mr. Pritt: I understood, Mr. Deputy-Speaker, that if you did not hear a word, it was not heard. But if that is not so, I will withdraw the statement.

Captain Baird: For the first time to-night 1 have caught the atmosphere of this House and feel I am in a fighting mood. I found that the courts-martial had all certain points in common. The first and most important point was that almost all those soldiers who came before them on this charge were young boys between the ages of 19 and 24.
I want to cite one case which I remember as an example which was typical of almost all of them. It was that of a boy of 19. He had been in three actions, one after the other, for a week. At last his nerve broke. He asked to be returned to the medical officer for his opinion. He went back to the medical officer, who was the only medical officer attached to the unit, and was very busy attending the wounded men. Anyone who knows the work of a Regimental M.O. must realise that he had not time to attend to people such as this young boy. He simply asked him his name and told him to go back up the line again. Back he went again. His N.C.O., who was very sympathetic, talked to him and explained the seriousness of what he was doing, and tried to nurse him back again to become a good soldier. However, as the N.C.O. was talking to him, the barrage broke out again, and the young boy refused to go forward. He stayed all that day in company headquarters, and again at night. The sergeant-major spoke to him again, tried to convince him to go back to his comrades. He tried once or twice, but simply could not bear it, and was sent back to detention camp. He came before a court-martial. The sergeant-major and the CO. said that in the past the young boy had been a good soldier, but they said that if he were allowed to continue he would break the morale of the whole company. I agree with that. It was necessary that they should be sent to detention camps.
The point is that when we came to sentence that young fellow, and had to find he was guilty, we had instructions from 21st Army Group that, because of the great number of these cases, it was necessary to make the sentence a very heavy one. Again I agree with that. The

order was that the minimum sentence was to be three years' hard labour. That young boy, who should have gone to hospital, in my opinion, went to detention camp for three years. Afterwards I had to visit detention camps on numerous occasions. I do not want to try to picture the terrible conditions of these camps. Men, again almost all very young men, were forced to do all their exercises at the double with their packs on— [Hon, Members: "Hear, hear."] It may have been necessary—

Hon. Members: It was.

Captain Baird: But it was very degrading. I want to read an extract from a letter I have just received, smuggled out of a prison camp by a young man sentenced for the crime we are discussing. He says this:
I would ask, does the public really know what constitutes detention and do they know this type of offender is singled out for special severity of treatment? For example, if you commit a really shocking crime like rape or armed robbery against defenceless citizens, or operate on the black market to the detriment of one's fellow men, you do not lose Service or gratuity. But if you lose your nerve then you are deemed to have merited the loss of the above mentioned. It is an ironical fact that desertion will not protect a man from years of penal servitude, as any of the above mentioned crimes.
I will summarise the argument by quoting from a letter in my local paper yesterday, which I believe puts the case very well:
The forthcoming attempt by Capt. Baird to obtain an amnesty for Servicemen convicted of cowardice in the face of the enemy will, I am sure, receive the approbation of everyone, and especially those of us who have endured battle conditions at any time. As we think of these unhappy individuals, the feeling that there but for the Grace of God go all of us is uppermost in our minds. Many of the men were probably still very young, and often with only six months of Army life behind them, when the sudden impact with the carnage of war proved overpowering. In other cases, the breakdown could be attributed to faulty leadership, or perhaps the sight of a close friend blown to pieces or horribly maimed on the battlefield. Undoubtedly there were cases of inexcusable dereliction of duty and certainly it was essential that all types of faltering should be punished on the spot, otherwise discipline might have sagged, with inevitable increase in casualties.
I agree with that letter. I agree that when these men were sentenced they were


sentenced justly. But the war is now over, and the only argument I have heard against my case is that if we grant an amnesty to these young men it will create a precedent, and encourage people to desert in the next war. If we are preparing for the next war in this way, then refuse an amnesty, but if we are hoping to build a world without war then grant an amnesty. I appeal to the Secretary of State for War tonight to open the gates to these young men. They may have been failures in a world at war. Most of them have never known a world at peace. I am convinced that the great majority of them, if given a chance, will make a better job of it in a world of peace than they made of it in a world of war.

11.18 p.m.

Colonel Gomme-Duncan: I have listened with a good deal of interest to what the hon. and gallant Member has said. I have learned that a dental officer can sit on a court-martial. I did not' know that. [An Hon. Member: "Why not?"] I agree. I am not trying to decry it in any way.

Captain Baird: At one place where I was stationed, for quite a while, because we were not being used in a professional capacity, we were asked to take our place in the courts-martial—medical and dental officers.

Colonel Gomme-Duncan: I accept that. I do not dispute it in any way. There are unfortunately a considerable number of cases of the type to which the hon. and gallant Member has drawn attention, but there are also a large number of cases of men who worked the thing out to the day and said, "If I commit such and such a crime I shall go to prison for so long, the war will be over, there will be an amnesty, and I shall be all right." I have known many cases like that. Whatever we want to do for the good cases, and we are all sympathetic to them, an amnesty is not the answer. Otherwise these fellows who are banking on an amnesty will get away with it. While I am sympathetic, I wish to. say, in the light of my experience of 30 years of soldiering, that that is not the answer. I hope that the Secretary of State for War will not give way on this point, so that he may be able to do something for the good cases.

11.20 p.m.

Mr. T. J. Brooks: I am Speaking in the presence of several gallant soldiers who fought in the last war, and I want to bring to the notice of the House a special case, about which I wrote to the War Office some time ago relating to a boy who was charged with attempting to avoid service with his unit when on active service overseas. He was away from his unit for some time. When tried, he pleaded "Not Guilty," but he was found "Guilty" and sentenced to six years' penal servitude, of which three years were remitted on confirmation. I have been informed that this mitigated sentence is the normal one for the Serious offence of desertion in a theatre of active operations overseas.
At the trial, this boy had the services of an officer to defend him, but what kind of brief would this officer have? Reference was made to the boy's previous good character, but how would the officer know anything at all about this young man and his family? How could he be aware that there was definite mental defect in the family? The boy may have been physically fit on enlistment, and was possibly A.I, but was he mentally fit? The mental aspect of the matter does not seem to have been considered at all. There is definite evidence that this young man has the mind of a very much younger boy. We know that even the minds of men cannot always stand the terrible ordeal of battle, and we know that officers have sometimes reacted badly when under fire. I have seen officers trained, but even those who trained them could not know how they would react. If men are liable to fail, why should they be sent to gaol? Surely we are dealing with a state of mind, and are making it criminal to suffer from developed fear, especially when there already is a mental defect. Surely this should be an answer to the court. The judges are military men with military minds, with no thought but for military discipline. I want to ask the Minister whether mental specialists are employed in these cases. If not, why not? We have to appreciate the feelings and the anxieties of the families, especially where there is mental weakness in the family history. I ask that more attention be given to the case of this boy, and that the War Office should be more sympathetic to such cases.

11.25 p.m.

The Secretary of State for War (Mr. Lawson): As this is my fourth Adjournment Debate on four Sitting Days, I think that, although I shall not ask for an amnesty for the Secretary of State for War, hon. Members might consider the possibility of a suspension of sentence. I could have wished that this matter had been debated earlier in the evening and that there had been more time for it, because it is one of the matters on which we have to answer questions that touch men to the quick. During the past few years, the House has had great Debates on the operation of the death sentence for these offences. I am glad that the death sentence for these offences was abolished, and during this war, which was, I think, the first one that has been fought without the death sentence being in operation, the men of the Army stood the test, and the results proved that the abolition of the death sentence was a very wise decision.
We have taken workmen and workwomen suddenly from their homes, their work and the community in which they lived, and put them under unaccustomed conditions. Masses of them had never dreamed of becoming soldiers, and it was a great test for them when they were put into the firing line. Before I make the statement that I want to make tonight, I would like to say that I think it is a wonderful thing that, in this long sustained conflict, particularly when heavy bombing was taking place in this country, the standard of conduct of the people of this country was so high and that there was so little sign of nerves. During the war, when I met men in Africa, Italy and other places, one of the most striking things to me was that always the men in the line, or going up to the line, were more concerned about what was happening to the people at home when the bombing was taking place —what was happening to their wives, their children, their homes, and the country generally—than they were about themselves.
That is an amazing fact. It would be a miracle if that in those circumstances someone did not fail. It is a fact that, human nature being what it is, there will always be some who break when they are under fire. The Debate tonight has to do specifically with troops sentenced for refusal to carry out an order under fire.
Of course, there are large numbers of men who have been in prison, and who are in prison, as deserters, and I think it would be wrong of me if I did not deal with them tonight in the general statement I shall make. The number of soldiers serving sentences for refusing to obey an order while under fire is very small indeed. It amounts at the present time to no more than 41, of whom only 12 have served more than three months.

Captain Baird: Did the right hon. Gentleman say that only 12 have served more than three months?

Mr. Lawson: Yes. I think that the Debate does in fact cover the larger number of men sentenced for desertion in a theatre of active operations due to the stress of war. Cases of this description have to be severely dealt with during the war, but when hostilities ended, it became clear that a more lenient policy could be followed, since the offence was not one that the individual was likely to repeat. Instructions were, therefore, issued throughout the Army in October that sentences of three years penal servitude for offences of this type —that is general desertion —should normally be suspended after the soldier had served 8 months, those of four years after 9 or 10 months and those of five years after 11 or 12 months. Further, desertion cases not due to stress of war are usually suspended after 11 or 12 months of a three years' sentence of penal servitude has been served.
Although the instruction I have mentioned refer to desertion cases only, the same policy was subsequently put into effect for other types of military offences in addition to desertion committed before V.J. Day. These have been subjected to special review and suspension is now being carried out on similar lines to those I have mentioned. These are cases in addition to desertion. I think the House will be interested in the figures that I have to give up to 5th November this year. Of 3,156 soldiers under sentence in this country on V.J. Day nearly 59 per cent. had been released by 5th November, and of 6,751 serving sentences overseas on V.J. Day nearly 37 ½per cent. have been released. These include the case mentioned by my hon. and gallant Friend (Captain Baird).
I ought to say about this 37 ½ per cent. of cases, that these are overseas cases and that the instruction was in operation in this country much quicker than it was in the overseas areas and that, to some extent, accounts for the differences between those at home and those overseas. The new policy I have mentioned has taken longer to come into operation overseas.
There are two points of view about this question. There are the critics of the lenient view. But I think, considering the standard of morale and the standard of conduct on the field generally during this war, the course I have taken is the right one. I just want to finish with this —and it is a remarkable thing. One of the Members of this House —I will not mention his name because I do not want to identify the particular boy concerned —came to see me about a particular case. The boy had been sentenced to three years. He pleaded guilty; he was quite frank about it. His sentence was suspended. He served 12 months. We did what we do in these cases. We make a practice of getting them home as soon as possible, because their people say that the neighbours may talk, as people are concerned about these matters. We

sent this boy home. The boy said he had made good. I am glad to tell the House that he has signed on for seven years, as he said that he felt' that he was in honour bound to do that for the leniency that had been shown him in a case of which he said he was guilty. I had a beautiful letter from his parents. I will not trouble the House with reading it except for one short sentence. This reads:
You can be sure that he returns to the Service he holds so dear, and we are sure you will never have cause to regret the action with respect to that boy.
I am sure that is one piece of concrete evidence of the fact that in this particular case the human consideration given to a man in such a position, even if he has shown weakness in the face of fire, has been well worth while.

It being half an hour after the conclusion of Business exempted from the provisions of the Standing Order (Sittings of the House), Mr. DEPUTY-SPEAKER adjourned the House, without Question put, pursuant to the Standing Order, as modified for this Session by the Order made upon 16th August.

Adjourned at Twenty-five Minutes to Twelve o'Clock.